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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52 views

Econometrics - Simultaneous Equations and Perfect Inelasticity in the Context of Regression

Assume a certain market can be described by Demand Function: $$Q_{d, t} = \alpha_0 + \alpha_1 P_t + \mu_{1, t}$$ Supply Function: $$Q_{s, t} = \beta_0 P_t + \mu_{2, t}$$ The price in this market is ...
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17 views

*Within-country* Fertility vs. income

Any pointers to reviews or data-sets or meta-analyses looking at the relationship between household fertility rate and family income/wealth (possibly with other factors like education and geographical ...
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243 views

Dynamic factor model for inflation (UIG)

I'm trying to replicate some results of Fed Underlying Inflation Gauge (UIG) model, which is a dynamic factor model to capture inflation trend. https://www.newyorkfed.org/research/policy/underlying-...
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42 views

Data request: guidance to find football betting data

Can someone please guide me to find data which fulfills following requests: It should be from one of the major leagues: Premier League, Bundesliga, La liga or Serie A. From a given betting company, I ...
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27 views

Approximate factor model: Weakly correlated and eigenvalue

To my best knowledge, in Ross's APT, it is assumed that the pricing model is the exact factor model. Chamberlain (1983 ECTA) expanded it into the approximate factor model. In the exact factor ...
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518 views

What does Sims' critique of economics models actually say?

I've been searching for answer, but I can't find a clear cut one. From what I understand it says that, in the realistic model there are no exogenous variables? Or does it say that there can be no ...
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111 views

VAR/VECM Fitted/Predicted values (BEER model)

I am running a BEER model (Behavioral Equilibrium Exchange Rate Model) and using VAR/VECM and Johansen method to estimate the equation. For context, I am looking at the XR of Czech crown and the euro. ...
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152 views

Difference in Regression Discontinuity Estimates

Suppose I run a regression discontinuity design (RDD) for two different samples - say, separately for regions A and B of the same country. I get RDD estimates that are statistically significant in ...
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89 views

Evaluating the return of a trading strategy on forex markets

Which measure should I use to evaluate the returns generated with a trading strategy based on announcements of macro-economic news on forex markets. I thought about the Sharpe-ratio, however I do not ...
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415 views

How to test if variables are jointly determined?

If I wanted to test, for example, if consumption growth and credit growth are jointly determined, and therefore justifying the use of instrumental variables, how would I go about this? Would running a ...
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89 views

Bootstrapping from CPS with weights

I'm using CPS monthly individual data which comes with wtfinl as a float weight. I'm computing some annual statistic for unemployed. I do that by Sum up ...
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27 views

How to compute standard errors for Blanchard-Quah-restricted SVAR?

People tell me that the way of bootstrapping standard errors in the original paper is incorrect, but then how should I do it? Is there a convention of how to compute standard errors for Blanchard-...
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153 views

Interpreting multiple interaction terms

I'm running the following regression on panel data: $ %Translator MathMagic Pro for InDesign Mac v9.14, LaTeX converter, 2016.9.11 22:27 \begin{array}{l} {{\mathrm{tscorek}}_{\mathrm{i}}\mathrm{{=}}{\...
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94 views

Motivation for use of GLS instead of System OLS

In Wooldridge's graduate book, 2nd edition, page 174, he states «The usual motivation for the GLS estimator is to transform a system of equations where the error has a nonscalar variance-covariance ...
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39 views

What are the currently accepted methods to estimate a firm's productivity?

While there are a lot of methods one can think of, like computing the ratio of profits to assets or profits to sales, apparently it is a difficult problem. It would be useful to know how effectively ...
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18 views

A game plan for Cross-Section modelling

Imagine we have already built our linear regression model, with a certain dataset. Which order of tests would you follow to be sure that whatever conclusions you may want to extract are correct. For ...
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20 views

How can i find the best GARCH (p,q) in this serie?

Of course the first step would be to make the first difference of the series, because there's obviusly a unit root. Can someone offer a solution to find the best Garch? I would be pleased to send the ...
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365 views

SVAR Historical decomposition

Does anyone know how to do VAR historical decomposition of a series in R?
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38 views

Recommendations for ways to address gaps in GDP data?

I am a biologist that is using GDP data as part of my next research project and I am finding large gaps in the data, both in terms of years and countries. I am wondering what the best practice is for ...
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327 views

Help with regressing GDP and independent variables

Background: I working on how GDP is affected by CPI, investment,consumption and commodity price. I am working with time-series Problem: I tried to regress based on log values of all but this resulted ...
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34 views

Interaction dummies estimates influence other estimates?

In page 311 of Gujarati Basic Econometrics, there's the following example for use of dummy variables, when we're interested in the interaction between two qualitative terms. Shouldn't we have ...
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21 views

equivalence in hypothesis testing

I have the following unrestricted model $y_i=\beta_1+\beta_2x_{2i}+\beta_3x_{3i}+u$ and the restriction $\beta_2+\beta_3=1$ I need to give an equivalent unrestricted model such that if one of its ...
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75 views

Abnormal Return - Event Study

I am looking to calculate and explain abnormal returns (AR) on dividend announcement events: Regression: R = a + B(MarktReturn) + e E(R) = a + BMktReturn Therefore AR = R-ER To explain the AR, I ...
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100 views

What's an end effect?

Maybe it's just my english... In reading some notes on the estimations of parameters for stationary models like AR, MA, and ARMA, the author states that when we apply OLS to a simple AR(1) $\{Y_t\}$ ...
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30 views

Attribution Modeling

My problem involves measuring the impact of four activities undertaken by a population of 1,000 individuals that is attempting to lose weight. The four activities are: (a) Eating healthy food; (b) ...
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39 views

Partial least square structural equation modeling

The Partial least square structural equation modeling (PLS-PM, PLS-SEM) method to structural equation modeling allows estimating complex cause-effect relationship models with latent variables. This ...
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127 views

Using an interaction term as the instrument (as in Barro QJE (2011))

I recently came across Barro and Redlick QJE (2011) paper, "Macroeconomic Effects from Government Purchases and Taxes", in which the authors instrument for defense spending with an interaction term ...
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42 views

Using variance-ratios as moment conditions in a GMM estimation

I have a few time-series, say ${X, Y, Z}$ at a given frequency, say, yearly. Now I compute the yearly growth rates (ie log-differences): $dx = log(X_{t}/X_{t-1}), dy = ..., dz = ...$ and I compute ...
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130 views

steady point for impulse response function

I read several papers talking about the so called dust settling period for a impulse response function (IRF) derived from VAR. e.g., Nijs, Vincent R., et al. "The category-demand effects of price ...
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39 views

How to know if I've done the necessary corrections to my data so that the regression is valid?

Obviously the data can't be changed to fit a regression, it should be (kind of) the other way around. But, sometimes the data has stuff going on that needs correction. For example, I got raw data ...
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81 views

A Specialized Guide for Deflating Variables: does it exist?

I have done this very frequently in this year, deflating variables, specially for the purpose of demand estimation. I also asked a relevant question on the subject previously (here: Heuristics with ...
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69 views

OLS estimator panel data

I need to show that the residuals from the regression of $x_{it} - \bar x_i $ on a constant and $\bar x_i $ is just $x_{it} - \bar x_i $ itself. By stnadard OLS regression results, in the simple ...
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114 views

Johansen cointegration analysis, cointegrating vectors and identification

I want to analyse the long run relation between, let's say 5 variables. Scenario 1. Below is the output from a Johansen test on the five variables: ...
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3k views

Variance of a dummy variable

I have always thought that variation in regressors are a good thing. In fact, one can show that the precision of the estimated coefficients is increasing in the variance of the regessors. I have also ...
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50 views

Macroeconometric models with wrong input but better fit/forecast

Could you give an example of the situation when if you input wrong (economic-wise, but not mathematically) parameters the model could fit/forecast better?
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64 views

Example of the change of measure proposed in Hansen (2012)

In this question, I'm continuing to explore the tools used/presented in Lars Hansen's Econometrica paper "Dynamic Valuation Decomposition within Stochastic Economies" (2012). I'm trying to compute an ...
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1answer
119 views

Can one use the standard deviation of a variable as a regressor?

I am wondering if you could use the standard deviation of a variable as a regressor in an econometrics model? Consider the following hypothetical model: $$y_{it} = \alpha_0 + \alpha_{1}T_{it} + \...
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1answer
249 views

Panel Data and Forecasting

I have balanced panel data for around 130 countries, over three years. I ran a fixed effects regression using 'country' as my panel variable, and adding dummies for 'year'. I want to forecast the ...
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1answer
532 views

Should I deflate a nominal variable when forecasting it?

Say I have a structural equation that is forecasting Y. Y is a nominal financial variable that grows with time due to inflation. I have an economic determinant that is a rate and therefore does not ...
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1answer
45 views

MLE estimation with serially correlated errors

I want to estimate the parameters of $a_t = a_{t-1}+\theta+\epsilon_t$ using MLE. Assume errors $\epsilon_t$ are serially correlated, then how would I choose the likelihood function?
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35 views

What percentage of utils do the top 1% pay in tax

A commonly cited statistic in American politics is the top 1% of Americans earn 20% of all income, but may 40% of all income taxes. This is measured in dollars, however, and a dollar is worth more to ...
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38 views

Estimate a Monetary Policy Reaction Function with Generalized Method of Moments

I want to estimate a Monetaryu Policy Reaction function with GMM. I have well understood how to estimate a distribution (e.g. the normal distribution, the log-normal distribution, and so on) with GMM. ...
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8 views

How to test parameter restriction in seemingly unrelated regression using STATA?

Given constrain 1: [w1]ln_p2 = [w2]ln_p1 I estimate an Ideal Demand System using surge command in STATA w1 = a1 + g11 (ln_p1) + g12 (ln_p2) + b1(real_income) w2 = a2 + g21 (ln_p1) + g22 (ln_p2) + b2(...
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14 views

How many leads we use for parallel trends testing in daily data (difference-in-differences)?

In a difference-in-differences setting, if we deal with yearly data, we normally test the parallel trends assumption for 3 or 4 years before the event dates. However, when dealing with daily data, how ...
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1answer
36 views

Are there any papers which used the event study methodology NOT in a financial market context?

I was advised to implement an event study in the context of air pollution levels after an event had happened. Now my problem is, that I can not really find any introductory literature (or papers), ...
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11 views

Why we need to control for import and exchange rate change when examining asset growth?

Dasgupta , 2019 examines the impact of antitrust laws on asset growth, total net external financing, debt-to-equity ratio. In his regression, I saw that he controls for imports as a percentage of GDP, ...
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18 views

Event study on market revenue

I am interested in performing an event study. Can it be modified to assess the impact of an event/s on a market's revenue as opposed to the value of a firm? Thanks
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25 views

How many subsample ways we normally have?

I am wondering how many subsample ways or to get estimates for some sub-categories of the data without sub-sampling. So far I know two approaches: 1> We can divide the whole sample into two ...
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20 views

What are the advantage of adding interactive variable over subsampling in drawing conclusions?

As 1muflon1 mentioned, there are two main advantages of adding interaction variables over subsampling are: (1) having higher sample size, leading to higher precision and (2) higher degree of freedom. ...
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16 views

How to explain the significant levels change when adding interaction variables?

@1muflon1 has a great explanation regarding the interaction variable meanings when I want to compare the laws' effect on firms' asset growth between developed and developing countries. Today, when ...