Questions tagged [econometrics]

Econometrics is the application of statistical methods to economic data for various purposes such as of testing hypotheses, infering causal relationships and forecasting future trends. Only use this tag for questions relating to the theoretical aspect of an econometric technique.

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30 views

Do you know how to compute the IRF of a GARCH (1,1)

We have the following model (GARCH (1,1) ) $y_t=\sigma_t\epsilon_t$ $\sigma_t^2 = \omega + \beta*\sigma_{t-1}^2 + \gamma*y_{t-1}^2$ Note that we can rewrite the latter as: $\sigma_t^2=\frac{\omega}{1-\...
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Econometrics - Panel Data: Relationship between total, within and between

I need to prove the following statement, which is $\hat{\beta}_{total} = W(x)\hat{\beta}_{within} + (I-W(x))\hat{\beta}_{between}$, where $\hat{\beta}_{within}$ is the fixed effect estimator(i.e. the ...
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1answer
154 views

Is this an an endogeneity/simultaneity problem?

I would like to know if the logic in these two situations is correct. Situation 1: Let's say we have a continuous dependent variable, $y_1$, that then has a causal impact on an unobserved variable, $\...
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1answer
418 views

Stationarity vs weak dependence

I am doing an undergraduate course in econometrics where we are using the text Introduction to Econometrics by Dougherty. While going through time series, it was mentioned that one of the necessary ...
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0answers
22 views

Do applied papers introduce new notation for every regression?

I am currently writing an empirical paper which reports on the results from estimating a number of regression models. Question: is it standard to introduce new notation for each of these models, or ...
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1answer
20 views

What's the minimum number of datapoints in order to run a diff-in-diff?

I was thinking about running a diff-in-diff with fixed effect in order to deal with a panel data experiment. The problem is that I don't know how many datapoints I need in order to the experiment be ...
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1answer
52 views

Interacting covariates with the instrument in the first stage

If I want to run a 2 stage least squares (2SLS) regression with: Relationship of interest: $Y = \alpha + \beta X + \varepsilon $, where $X$ is the endogenous explanatory variable of interest. If I ...
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2answers
83 views

How can anyone possibly predict how the price of anything (stocks, Bitcoin, fiat, etc.) will change without "insider knowledge"? [closed]

Other than the fact that all centralized (and thus "quick") exchanges require KYC/AML nonsense, making it impossible for me to have an account there, I've never dared to even try once to &...
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1answer
67 views

Do I have to bootstrap the dummy variables used for event dates in an event study?

I am doing a project where i am trying to estimate the effect of the inclusion of a stock in an ETF on its returns, meaning that i am trying to see how the inclusion of a stock in a given ETF affects ...
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1answer
22 views

is it better a low or high WACC for a company valuation?

I'm doing a statistical report of some italian banks and I'm looking for correlation between Corporate governance practices and bank values. I'm focusing on WACC and I would like to understand if an ...
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Behavioral responses of tax policy on labour supply ( first time doing Difference in Differences)

I am trying to estimate the causal effects of the The Working Income Tax Benefit (WITB) on the labour supply of married women in Canada. The WITB is essentially equivalent to the EITC. I am looking at ...
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1answer
50 views

Very basic question about confidence intervals

Suppose that I estimate a (frequentist) confidence interval for the sample mean of a variable $X$, say at the 95% level. Suppose I also estimate a 95% confidence for the sample mean of a variable $Y$. ...
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33 views

Advice on method for analyzing the effects of increase in minimum wage

As a hobbyist and generally curious person with a lot of free time at home, I was curious what would be a good method to analyze the effect of an increase in the minimum wage of a country if you only ...
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1answer
40 views

How to estimate a model by pooled OLS when we DO NOT have panel data?

The data set is mostly binary with years and location. We have a linear probability model. We DO NOT have panel data. How to estimate this model in R by Pooled OLS? Again, we DO NOT have panel data.
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1answer
42 views

Making sure the p-values of my OLS estimates are correct

I have learned the basics of the Classical Linear Regression Model and also various diagnostic tests to check if the assumptions of the CLRM are met, such as homoskedadticity, absence of near perfect ...
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25 views

Comparison of coefficients in log(y_t) and log(y_t/y_0) LHS specifications in LP-IV

I would have a question related to econometrics. Likely not all the details are needed, but please bear with me. My goal is to use local projection with an instrument to find out the response of an ...
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1answer
38 views

Help interpreting standard deviation

I am looking at the 1979 cohort of the National Longitudinal Survey of Youth from the BLS. See here : https://www.bls.gov/nls/nlsy79.htm I am just having some trouble interpreting the values for ...
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1answer
48 views

Why N>T is required on system GMM estimations?

My question is why N>T is required when working with dynamic panel estimations based on system GMM, such as xtdpdsys at stata. Is that based on the potential lost of information due to orthogonal ...
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1answer
132 views

Interpretation of a 2SLS Coefficient - Civil War Determinants

I am a bit confused because of the interpretation of a coefficient in my analysis. I am using 2SLS in two different subsamples with economic growth as endogenous variable. It is instrumented by a ...
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2answers
66 views

Short textbook of econometrics?

I'm looking for a textbook about econometrics, but I'd like to find one with the following features : Short (350 pag. max) Introductory Clear on the math and stats used With exercises Do you know a ...
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1answer
52 views

Why do we need at least as many instrumental variables as endogenous regressors to identify parameters in 2SLS?

As the title says. Why do we need at least as many instrumental variables as endogenous regressors to identify parameters?
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1answer
99 views

Monte carlo simulation for macroeconomist

I would like to know if it is useful to learn Monte Carlo simulations if I want to focus on macroeconometrics ? Or even is it useful outside of academics ?
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Does GMM have any assumptions that you can't test empirically (and must instead argue qualitatively for)?

My understanding is that you can empirically test some of the main assumptions required for using a GMM estimator. Namely, I understand that you can test over-identifying restrictions with Hansen's J ...
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1answer
59 views

Cointegration in stock market between different market places

Hi guys im interested in cointegration in stock market between Brazil, USA, London, China, India, Argentina and Hong Kong. Since I want to compare each country’s index to the BR index, how do i do to ...
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Imputing # of unemployed from Labor Force Survey

I am working on state-level data, where one state has recently stopped publishing the absolute figures for the number of the unemployed. Instead, it currently only releases U and LFP rates. ...
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1answer
62 views

Dif-in-Dif aggregating or not?

If I have data that is on some level, say industry-county-year, and a certain treatment, say a regulation change in some states in certain years. Is it possible to run a Dif-in-Dif on the industry-...
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38 views

complex Difference-in-difference formula

I have 5-year sales information from a grocery store in Canada. I want to check whether an event that happened in 2017, affected the effect of the price of a product on its sales. For example, imagine ...
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44 views

Endogeneity in demand estimation using demand systems estimations

Assume I have quantities and prices for J products across M markets in T periods. I want to estimate their elasticities. I construct J regressions of this type: $$\log \left(q_{j m t}\right)=\alpha_{t}...
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Is unobserved heterogenity in mixed logit models variable specific?

I have a mixed logit model with travel cost, travel time, and mode constants. If I only randomize travel cost and keep fixed coefficients for travel time and mode constants, will the model capture ...
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0answers
16 views

Measure of Public Transportation Efficiency (Consumer side)

I'm looking for data on public transportation efficiency for consumers by city or county. In some places you can get across town in under 20min and in other places it takes 2hrs and this likely has ...
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0answers
16 views

Measure of urban-ness or city density

I have a dependent variable I want to examine in relation to a measure of city density. This means city population as well as geographical spread. Ideally, it would also include a measure of ...
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37 views

How can I add a multidimensional panel to estimate TFP (year, id, region) in R?

I'm not sure about adding fixed effects for the variables year,id,region (using the estprod library) as in this paper using LP stimator. In the STATA forum ( #18 #...
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1answer
63 views

Change vs Difference

I have data on "share in labor employed in manual occupations" for two years (i.e. 1980 and 2005) and looking to create the following dependent variable: change in the share of labor ...
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1answer
52 views

Two-year difference-in-differences model design

Is there some literature about two-year difference-in-differences (DiD) models? Suppose a policy was implemented in 1982, but not strictly enforced among all people. Can I still estimate a DiD model ...
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25 views

Methodology of Estimating Economic Costs?

To be specific, I am currently devising an honours thesis proposal to estimate the effects of a lack of competition in consumer electronic repair markets on variables such as firm profits, consumer ...
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45 views

What type of econometrics is practised most?

This might sound like a weird question, but what type of econometrics is most common in academia and / or the private sector? Here I am thinking about time series econometrics (Bayesian and ...
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16 views

Does a structural variance break in one variable of a VAR model matter?

There is a structural variance break in one of my variables ($y_t$) for a VAR model (visually though). Using an AR(1) model and CUSUM square test, I was able to detect it. However, after putting it ...
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0answers
25 views

Use MLE to calculate exponential distribution parameter

The question is from A Guide to Econometrics by Peter Kennedy (5th edition, page 504.) Suppose you have a random sample of workers, from several localities, who have recently suffered, or are ...
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1answer
67 views

Unbalanced panel data in prodest package in R

I have a question regarding the usage of unbalanced panel data for TFP estimation by using the prodest package. The dataset could be found here: https://drive.google.com/file/d/...
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1answer
109 views

Is clustered standard errors the best way for all regressions that uses clustered data?

Using clustered standard errors assumes that the regression coefficients are the same for all the clusters in the data, right? What if they are not the same. For example, I have used F-test to compare ...
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29 views

Multiple binary instruments

Suppose we use instrumental variables with a single binary instrument $Z$. Let $Y$ denote the (continuous) outcome and $X$ denote the single explanatory variable of interest. If I understand matters ...
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0answers
10 views

Diff-in-Diff framework where treatment time is not fixed and multiple treatment group with sub level of treatment

The study is analyze a data for 30 yrs time period with two treatment group denoted T_1 & T_2 and a control group. Treatment ...
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0answers
26 views

Instrumental variable regression: How many interpretations?

I was reading Amemiya "Non-linear regression models" (1983) in which he says that This statement should not be construed as a criticism of Theil's interpretation. I know of at least six ...
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48 views

Deconvolution in economics

Here it says In mathematics, deconvolution is an algorithm-based process used to enhance signals from recorded data. Where the recorded data can be modeled as a pure signal that is distorted by a ...
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0answers
21 views

Proof of Criteria for Local Identification in Rothenberg (1971)

My question is regarding Theorem 1 (page 579) of Rothenberg (1971). It is associated with four assumptions given on the same page. But, I only have a question about a single step of the proof, so I ...
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0answers
13 views

Maximizing Quality Indicator

I am having a countries panel data on macro variables<gdp, inflation etc) and a continuous quality indicator variable(with gaps) . My models suggests that the quality indicator is a factor for gdp ...
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1answer
50 views

These two estimators are equal?

I have a question so basically. I have two model $$y= X_1b_1+X_2b_2+u$$ And $$X_2=y\beta_1+X_2\beta_2+v$$ I want to show $b_1=\beta_1$ Are these estimators are equivalent? $$b_1= (X_1’M_1X_1)^{-1} X_1’...
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1answer
59 views

How does explanatory variables in variance affect unconditional variance of GARCH(1,1)

I have a question about the unconditional variance of a GARCH process, where exogenous explanatory variables are included in the variance. The usual GARCH models the variance using: $$\sigma^2_t=\...
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52 views

t test and F test are equivalent under single restriction case

In Classic linear regression model, under the single restriction $$y=X\beta +u$$ $$H_0: \beta_j=0$$ If I apply t test, then the t statistic is derived as follows $$\frac{b_j-\beta_j}{s\sqrt{a_{jj}}}$$ ...
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1answer
24 views

The instrument in "The Colonial Origins of Comparative Development"

I am hoping to understand when an instrument is appropriate. For the purposes of this question, I'm considering a simplied version of the model in AJR (2000): $$\begin{aligned}\text{GDP} &\sim \...

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