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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13 views

Time series for contrasting empirically money demand and Taylor rules series

Non-cashless New-keynesian models often include discretionary monetary policy expressed as a Taylor rule: $1+i_t = (1+i)\left(\frac{1+\pi_t}{1+\pi}\right)^{\phi_\pi}\left(\frac{y_t}{y_t^n}\right)^{\...
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Is Hodrick-Prescott filter optimal with irregular component?

I need to extract cyclical component from time series, when doing seasonal adjustment I have the option to remove, apart from seasonal component, the irregular component. Then I'll apply HP to the ...
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30 views

When to use dynamic panel data models

I recently got a comment that I should use dynamic panel data model instead of a static one because my outcome is likely to be serially correlated. I guess it makes sense for my application, but it ...
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45 views

If we clustered by country, why we need to cluster by firms and industry?

From this discussion, it seems to me that if the test survives when clustering by countries, we do not need to cluster by industries or firms because firms and industries for sure have more ...
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What should we conclude when the significant levels are different but the sign are similar among coefficients of variable of interest?

I saw the impact of anticollusion laws on dependent variables Y across the country by using generalized DID by following Dasgupta, 2019. The identification is: $Y_{it}$ = $\alpha$ + $\beta$ $(pt)_{kt}$...
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Why this is not possible to start a new banking system without interest (riba) where the country's central bank is interest base? [closed]

Some of the scholar or researcher said that it is not fully possible to start new banking system without interest (riba) under the country's central bank where the central bank is under interest . ...
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104 views

IV estimate for entire sample is larger than IV estimates for subsets of sample?

I am using two-stage least squares to estimate a local average treatment effect, with 'treatment' being the endogenous variable and 'assignment to treatment' being the instrument. If I use my full ...
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28 views

Intercept in 2nd-stage Error Correction Model (ECM) regression — yes or no?

When doing a two-step ECM regression, do we add an intercept in the 2nd stage regression? I've seen course notes that add an intercept in the ECM, but some do not, so I'm confused if I should include ...
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Fixed effects vs first difference

Or more generally, what are the reasons for the absolute dominance of the fixed effects estimators to control for unobserved heterogeneity in large N, short T panel settings? I get that random effects ...
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Beginner's Guide to Econometrics [duplicate]

I was wondering if you could guide me to a book that I can use as a starting point for preparing myself for graduate level econometrics. I will be applying for MA programs this fall and wanted a head ...
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How to classify sample by time-variant index?

In finance paper, we have a famous index representing for law is WGI (World Governance Index). I am wondering how we classify countries by this time-variant index as this paper below. It is easy to ...
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638 views

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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67 views

What are the main differences among xtreg, areg, reghdfe?

Normally, when I run regressions for panel data in Stata using these three commands (xtreg,areg, ...
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When we should use $R^2$ instead of adjusted $R^2$?

Following this topic, adjusted $R^2$ has been widely used to validate the trustable explanation adding of the additional independent variables. I am wondering when we should use $R^2$ instead of ...
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How to explain the meaning of coefficients standing for ATT by words in DID setting?

In a generalized DID setting, we have the equation (I copy from a hot discussion that triggered my interest) $Margin_{ikjt}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$X_{ikt}$ + $\theta$$_{...
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Why standard errors in country-level variables are higher than that in firm-level variables?

From this dicussion, the commentor said Lastly, firm fixed effects may absorb more variation and likely reduced the size of their standard errors. In practice, I also mainly see that the standard ...
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35 views

What is the “dummy variable trap”?

I saw an interesting Economics post yesterday with the long comment. I post the regression result of the OP here I saw @chan1142 stated that Thanks. I see the _cons row. That's the intercept; the ...
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Why excluding intercept is dangerous if there is no literature back up in DID setting?

Recently, I run the regression for the generalised DID following this paper: $Y_{it}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$X_{ikt}$ + $\theta$$_t$ + $\gamma$$_i$ +$\epsilon$$_{it}$ (1)...
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124 views

A revisit to simple DID and Generalised DID

After a couple of questions being asked, I am curious about the inclusion of Post and Treat variable in a simple DID (two groups two-time period). We mainly know there are mainly two types of DID ...
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What does "dependent and independent variables only vary at the ($g,t$) level mean?

From de Chaisemartin and D'Haultfoeuille 2020, p.2969 I saw an equation $D_{g,t}$ $=$ $\alpha$ + $\gamma_g$ + $\delta_t$ + $\epsilon_{g,t}$ $D_{g,t}$ is the treatment in group $g$ at period $t$ They ...
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378 views

What is the difference between ATE and ATT?

I saw ATE and ATT in some discussions regarding DID settings recently. ATE is the Average Treatment Effect while ATT is Average Treatment Effects on Treated. I am wondering the difference between ...
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1answer
81 views

What are the meanings of “difference-in-differences” and “causal estimand”?

In one discussion, I saw the answer containing two words that I think can be used interchangeably, but I am not sure if it's the case. I simply state in other posts that the "generalized" **...
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What does “Difference-in-Diffrence” models with heterogeneous effects" mean?

Today, when reading this paper, page 3, I saw a sentence By decomposing the DD estimator into its sources of variation (the 2x2 DD’s) and providing an explicit interpretation of the weights in terms ...
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can i treat panel data as pooled data?

I'm working with panel data on Stata. However, I want to perform the ROC analysis and for what I know it is way simpler using the "logit" command instead of "xtlogit". Thus, my ...
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Asking for the exception of unparallel trend in DID testing

When reading this paper, The Common Trends Assuption section, p.457, I saw a paragraph: Researchers, however, must also think carefully about the conceptual reasons for which the common trends ...
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61 views

Why we need to add firm and year relating independent variables in two-way fixed effect model?

From what I know, these terms are very basic in econometrics but I still not yet fully got it. To me, year fixed effect is to control time-variant omitted variables and firm fixed effect is to control ...
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233 views

How to clarify the description of common trend assumption?

From reading a paper, I saw the way they describe the common trend is Specifically, DID designs assume that confounders varying across the groups are time invariant, and time-varying confounders are ...
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112 views

A doubt on summary statistic of post*treat variable of a paper using DID (Dong,2019)

Generalized DID or Staggered DID are DID using staggered treatment events. In Dong,2019's paper, he uses the framework as below: $Margin_{ikjt}$ = $\alpha$ + $\beta$ $(Leniency Law)_{kt}$ + $\delta$$...
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260 views

What shoud we do when the expected treatment overlaps control sample in DID?

In a generalized Difference-in-Differences in Dasgupta,2019 paper, he documented that control countries did not have a leniency law introduced over 2 years before to 5 years after the introduction of ...
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1answer
65 views

MA Representation of an AR Process - Plain English

Just wanted to ask a qualitative question in terms of the AR(1) having an infinite MA representation. Firstly, here, in reverse order: I can understand why it is important to ensure that an MA process ...
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25 views

Advice on research methodology

I had wanted to ask this community for some advice on some potential methodologies I am developing. Context: I want to evaluate the effectiveness of a component of this scholarship program, which ...
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Which statstical method/model should I use with my study?

my dear fellows. I mainly do experimental research, so I run experiments in which participants play a game repeatedly (for 20 periods for example). The dataset I get after the experiments would be ...
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1answer
32 views

K-step ahead forecast of VAR(2)

I am trying to determine how to write the K-step ahead forecast of a VAR(2), with two variables, as a weighted average of its mean and last observations. I understand that one must use companion form, ...
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1answer
53 views

Difference-in-Differences setup for policy evalution

I have a panel data set of housing prices from different neighborhoods in a city - and wish to test whether or not a policy has had an impact on the housing prices. The policy (treatment) is simply a ...
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30 views

IRF vs Autocorrelation function of AR(2)

Will the impulse response function and autocorrelation function of an AR(2) coincide? I say that they will not, because $IRF_{t}(t+k)$ (that is, the effect of a unit shock at time $t$, on the process ...
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14 views

Best method for extracting cycle component of time series

I have macroeconomic time series data, including both quantity and proportion variables (i.e. aggregate consumption, unemployment rate, etc.). I want to work with the rawest version of the data, ...
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1answer
19 views

How to obtain real money balances data

Theoretically real money balances ($m_t$) are defined as: $m_t=\frac{M_t}{P_t}$ Where $M_t$ are nominal money balances, and $P_t$ is the price index of the economy. If I were to make an empirical ...
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1answer
69 views

Interpretation of coefficients in a regression with a lagged dependent variable

I have estimated the following dynamic panel data model using GMM:           $\ln Y_{it}=\beta_0+\beta_1\ln Y_{it-1}+\beta_2\ln X_{it-1}+\epsilon_{it} $ where $Y$ is employment and $X$ is productivity....
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37 views

Multinominal logit regressions - marginal effects

I am running a multinominal logit regression with five dependent variable categories: "I disagree fully", "I disagree", "Neutral", "I agree" and "I agree ...
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1answer
49 views

Asymptotic variance vs. conditional variance in calculating regression estimator standard errors

I am given regression model $y_i=x_i^T\beta+\varepsilon_i$ with heteroscedasticity. Let $Avar(b)=E[x_ix_i^T]^{-1}E[\varepsilon_i^2x_ix_i^T]E[x_ix_i^T]^{-1}$ Hayashi's book states that regression ...
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19 views

Event Study - Definition of Estimation Window (Trading Days vs Non-Trading Days)

I am currently conducting a event study for my research project on M&A. I have all data available and want to use https://www.eventstudytools.com/. But there is one clear which is not apparent to ...
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48 views

Choosing a econometric model for this situation

I want to estimate the effect of adoption of a policy (POL1) by firms on their Value (Y). The adoption of POL1 is driven by self-selection. A new law forces a subgroup of firms to adopt a policy ...
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84 views

K-step ahead forecast for an AR(2)

Given an AR(2) process $y_{t}=\phi_{1}y_{t-1}+\phi_2 y_{t-2}$, I understand that the two-step ahead forecast (that is, $\mathbb{E}[y_{t+2}|y_t]$ is given by $(\phi_{1}^2+\phi_{2})y_{t}+\phi_{1}\phi_{2}...
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193 views

How to justify the treatment and control groups for Difference-In-Difference with staggered implementation of laws?

A. Background: Dong, 2019 and Dasgupta, 2019 used the same way to generate the treatment and control groups because they all learn about the impact of the same laws on different dependent variables. I ...
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1answer
48 views

Is exogeneity guaranteed for a lottery-generated instrumental variable?

If using $z$ as an instrument for $x$, to study the effect $x$ has on $y$ and given that $z$ was indeed generated through a lottery, is it definite that exogeneity of $z$ will hold? I have looked at ...
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Question on the choice of boundary in the CUSUM test when we make some resampling

Question on the choice of boundary in the CUSUM test when we make some resampling We are considering to make a CUSUM test for some economical time series $𝑋=(𝑥_1,..,x_n)$. Suppose 𝑋 contains many ...
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1answer
93 views

Quarterly regression, year-fixed effects

I am trying to inspect the heterogeneous effects of a USA-based shock on a panel of countries using quarterly panel data. My variables of interest are the USA-based shock (which has only temporal ...
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1answer
38 views

How to handle the missing values' issue of newly listed stocks?

I am trying to test some asset pricing models on 10 portfolios for the period of 2010-2020. The problem is that three of these portfolios included stocks that are newly listed in 2017 and 2018, so I ...
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1answer
40 views

Interaction term significant, joint hypothesis not

I am trying to find out if some channel is important in the transmission of shock x1 to outcome variable y. For this, I am running a regression in which y is on the LHS and x1 on the RHS, once alone ...
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33 views

SER of Random Walk Model?

Given the following random walk model $\Delta Y_t = Y_t - Y_{t-1}=\beta_0+u_t$, where $u_t \sim N(0,\sigma^2_u)$, how do we derive the standard error $\beta_0$ in terms of the estimated $\sigma^2_u$? ...

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