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.
1,340
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C-statistic when one estimation is just identified
My question is motivated by Do, Joshi, and Stopler's paper "Can Environmental Policy Reduce Infant Mortality? Evidence from the Ganga Pollution Cases".
A simplified form of their models that ...
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Using an elasticity to evaluate changes in a dependent variable
Often in textbooks and online I see thte definition of an elasticity to be as follows:
1) $\epsilon = \frac{\frac{\Delta Y}{Y}}{\frac{\Delta X}{X}}= \frac{\partial \log Y}{\partial \log X}$
Thus, ...
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heteroskedasticity variance estimator bias direction
If I have a model with heteroskedasticity issue, can I tell the bias direction of the coefficents variance estimator?
I would think that because I would correct it with WLS then I get BLUE (Best ...
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Housing Supply Elasticity: Proxy for Exogenous House Price Movements
Mian and Sufi (2014) say
We use individual and zip code level data, and exploit cross-sectional variation in house price growth to estimate the impact of rising home values on borrowing and ...
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What is the significance of the Hansen-Jagannathan bound?
The Wikipedia article on the Hansen-Jagannathan bound is short, giving only the following:
Hansen–Jagannathan bound is a theorem in financial economics that says that the ratio of the standard ...
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How do I construct the score process of a Markov model and verify that it is a Martingale?
The following is a specific question that is useful for demonstrating a general idea.
Consider the following autoregressive model:
$$
X_{t+1} = \alpha_0 + \beta_0 (X_t - \alpha_0) + W_{t+1},
$$
where ...
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Parallel pretrends in Callaway Sant'Anna "did" event study package
I have noticed that in some of my event study regressions, depending on which R package I use I get different results regarding the violation of parallel pretrends. Specifically, I ran an event study ...
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Equation 3.3.8 in Mostly Harmless Econometrics
Suppose that $S_i$ is continuously distributed, not necessarily non-negative. The conditional expectation function of interest is $h(t):=E[Y_i|S_i=t]$ has derivative $h'(t)$.
Equation 3.3.8 of Mostly ...
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Why does synthetic control not suffer from backdoor confounders?
From Scott Cunningham in Mixtape, on propensity score matching:
propensity score matching has not seen as wide adoption among
economists as in other non-experimental methods like regression
...
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Why is macroeconomics studied through "Shocks"?
"Why is modern macroeconomics all about identifying this shock and that shock?"
Coming from a theoretical econometrics background, I have recently delved into empirical macro literature. I am a bit ...
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What is the appeal of DSGE models?
As far as I understand people like them, because they fit the data quite well when compared to VAR's for example while also having an economic interpretation.
They appear to explain observations in a ...
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Definition of "Structural Equation" In Economics
The definition of term "Structural Equation" in Economics as defined in Introductory Econometrics: A Modern. Approach, Fifth Edition. Jeffrey M. Wooldridge. (page 859)
Structural Equation: An ...
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Are White's Robust standard errors robust to clustered errors?
I want to ask about OLS White's 1980 "robust" standard errors.
The key assumption, is that regression errors $u_i$ have distinct variances $σ_i^2$. Then the variance matrix is: $$\Sigma = \...
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Missing values in economic time series
I am trying to run a time series analysis on some variables - GDP being my dependent variable, and my independent variables are oil revenues, government expenditure, exports and FDI inflows. My data ...
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Decomposition of an additive functional into a Martingale part and other
This question relates to a theorem about the decomposition of additive functionals---a technique especially useful in macroeconomics and finance. This question has two objective. First, I don't have a ...
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The $\sqrt{N}$ convergence of semiparametric estimators of Newey 94, why does it converges to a normal distribution?
The famous Newey 94 paper on the asymptotic convergence of semiparametric estimators with a first non parametric step and a second parametric one, http://www.jstor.org/stable/2951752, establishes that ...
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IV Regression with More Observations for First Stage than Second Stage
This is a very basic question, but I need help. Imagine I have a dataset for variables y, x, and z. I am running an instrumental variable regression such that y is my main outcome variable. So I am ...
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Lasso Double Selection Stata Commands
The Belloni et al. 2014 paper develops the theory of Lasso in post-double selection. There are two commands that appear to me to perform this function: $dsregress$ and $pdslasso$.
The $dsregress$ ...
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Skepticism about the claims of instrument variable validity/exclusion through a statistical test—the Arellano-Bond Test
I am an applied researcher and occasionally come across papers that have panel data and that use dynamic models with both a fixed-effects term and lagged DV (or multiple autoregressive terms):
$y_{it} ...
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Differences between GMM and MSM?
In wikipedia, the main difference between GMM and MSM(Method of simulated Moments) is in the former the moment/orthogonality conditions can be evaluated analytically, while in the latter they cannot ...
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What are the most used approximations in economics?
As I progress in my self-study, I'm tired of having to search for several different approximations techniques used in economic textbooks. Sometimes the authors don't even tell the reader they are ...
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What methods - inspired by Haavelmo’s Structural Econometrics - can show that a partial equilibrium model is unreliable?
According to Spanos 2014 Revisiting Haavelmo's Structural econometrics: Bridging the gap between theory and data Dynamic Stochastic General Equilibrium models are statistically inadequate, in such an ...
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Solution of overdetermined system of moment conditions
In Hayashi Econometrics, page 207-8, ex3 (see hint), he says that even if a population moment conditions (GMM setting) system is overidentified it still has a solution, while the sample moment ...
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Problems with Representative Sampling
I am curious: what exactly are the problems caused by using representative sampling rather than random sampling whenever creating a subsample of large dataset for nonexperimental analysis. Further, ...
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Can anyone give me some reference on Mundell-Fleming model estimated empirically?
In virtually all texts of intermediate Macroeconomics$^1$ the Mundell-Fleming model is taught. But his estimate is not addressed in the classical texts of econometrics. I've always wanted to read some ...
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p-hacking vs. parameter calibration?
I'm currently tasked in my job to design a Prospect Theory (here CPT-)index as mentioned in Barberis, Mukherjee and Wang (2016): "Prospect Theory and Stock Returns: An Empirical Test", see ...
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"Derivative" of an indicator function
I am studying a paper where I have the following indicator function: $\text{I}(i) = \mathbf{1} \{ \eta^* - \eta(\beta(i)) + u(i) > 0 \}$ where $\beta(i)$ is taken from uniform distribution $U[\chi-\...
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Math basics for Macro&Micro economics and econometrics
I have just been admitted to a graduate school for studies in economics and I major in public administration during my undergraduate time. I have learnt linear algebra, single variable calculus, ...
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Why we need at least 40 groups to be properly clustered?
From this discussion, I deem that we need approximately 40 groups for clustering.
For example, if we want to clustered by industry, we need at least 40 industries, or if we want to cluster by year, we ...
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Including (demand) price elasticity in a price regression model
I am wondering how to include price elasticity (demand side) in a linear price regression model that is based on asuming price is the result of demand=supply.
Constructing a price regression under ...
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Doing a PhD Economics without background in formal theorems?
I could really use some advice. I am a new PhD student in Economics and Finance. My background is in economics, and while I did mathematics in my Master's course, it was more data-analysis based ...
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Does concavity of the utility function has any bite?
A utility function in general has only ordinal meaning, any monotone transformation preserves the order isomorphism of the underlying preference ordering. However, there are several econometrics ...
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Recommended tests do detect breaks in time series
What tests do you recommend for finding breaks in the following time series: log of inward FDI, log of nominal GDP, log of outward FDI from 1980 to 2012?
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Seemingly Unrelated Regression Estimation - Equivalent to OLS Standard errors?
In a SURE framework, if all X are the same in all regressions I was under the impression that there is no efficiency gain. Recently an assistant professor told me that the beta coefficients would be ...
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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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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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Efficient Market Hypothesis and constant ex-ante real interest rates?
According to Hayashi's Econometrics (page 151), efficient market hypothesis is a joint hypothesis combining:
Rational expectations $\rightarrow$ expected inflation$= \mathbb{E}(\pi_{t+1}|I_t)$, where ...
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What does one-sided polynomial on lag operator $L$ mean?
In some time series texts, there are some talks about one-sided polynomial on lag operator $L$. I tried looking up what this means, but I cannot find one.
So what does one-sided polynomial on lag ...
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In econometrics what are induced jobs?
Specifically, in the RIMS II model espoused by the BEA, capital spending in a region induces job creation therin, based off of specific multipliers.
Where do these multipliers come from, and what do ...
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Is the linear probability model consistent with utility maximization?
We know that Logit/probit models are consistent with utility maximization in the sense that the model implied probability of choosing option $1$ equals the probability that option $1$ has larger ...
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Test which functional form that best explains data
Tried asking this on Math Stack Exchange. Got no answer after a week, so trying here.
I had this question in an exam lately and I was not sure how to answer it. Now the exam is done, and I can't go ...
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Bootstrap always valid under asymptotic Normality?
If an estimator is known to have an asymptotically normal distribution, is that sufficient for the bootstrap to be valid?
It seems that is must be, but in 20 minutes of Googling I have come up empty ...
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Are simultaneous equation models out of fashion? Why?
According to Angrist & Pischke "Undergraduate econometrics instruction: Through our classes, darkly" (2017) Tables 2 and 3, econometrics textbooks deemphasized simultaneous equation ...
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When is an OLS parameter unchanged on a subsample?
There is a sample of $n$ observations, each element has a numeric $Y$ and $X$ characteristic. There is an OLS regression over the sample
$$
Y = b_0 + b_1 X + \textbf{u},
$$
$\textbf{u}$ being the ...
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conditional mean and conditional median
In Wooldridge's book (Page 452), it says
When linear absolute deviation (LAD) methods are applied alongside OLS, thre are often reasons to think a priori that OLS and LAD will not produce similar ...
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How is the ARIMA model a valid approach for forecasting Economic Variables?
Ive noticed the use of univariate forecasting methods (i.e the ARIMA model) employed in forecasting inflation (see references below).
How is this a valid approach in terms of forecasting economic ...
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Why Is Cointegration Important In Practice?
In one of my econometrics classes. I'm nearly finished a problem set and assigned readings on an introduction to cointegration. I've essentially finished the assignment, run dickey fuller tests on ...
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VAR inversion - looking for a good resource
I am having trouble with something that should be pretty basic.
I need to invert a VAR (vector autoregression). Everything I have read just brushes past the actual inversion process, taking for ...
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How to interpret "scale efficiency" in DEA?
I am reading the book Benchmarking with DEA, SFA, and R by Bogetoft and Otto. In Section 4.8 they discuss the concept of scale efficiency, and I am having trouble interpreting this concept.
The ...
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Black-Litterman---in what way are expected returns hard to estimate?
In the Wikipedia article about the Black-Litterman model, it states that the motivation
behind model is that "it is difficult to come up with reasonable estimates of expected returns." Why is it that ...