# 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.

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9 views

### Hedonic regression and attribute-shares in house prices

Given a house with price $P$ and attributes $h_1,\dots,h_n$, I want to estimate how much each attribute costs as a percentage of house price $P$. In other words, if we express house price as the sum ...
21 views

### Limit of random walk auto correlation function

Given the random walk process $y_{t}=y_{t-1}+e_{t}$, the auto correlation function is given by $corr(y_{t}, y_{t-h})=(\frac{t-h}{t})^{1/2}=(1-\frac{h}{t})^{1/2}$, which tends to 0 as t tends to ...
39 views

### Autocorrelation function of a random walk process

What is the intuition behind the result that the autocorrelation function of a random walk process $y_{t}=y_{t-1}+e_{t}$ tends to 1 as $t\rightarrow 0$? Thank you.
76 views

### Is there a reproducibility crisis in Economics?

I am an undergraduate economics student, and came across this paper by John Ionnadis on 'The Power of Bias in Economics Research'. the findings are quite bleak. https://academic.oup.com/ej/article/...
14 views

### Should I use start of quarter interest rate or end of quarter interest rate for time series regression?

Not sure what the correct procedure is since there is daily data for the period. Assume I can't find the average for the period.
24 views

### Unbiasedness of MoM estimator

Why is the method of moments estimator $g(\bar{Y})$ of $\theta$ only unbiased if $g(\mu)$ is a linear function of $\mu$? (Note: It is assumed that $\theta=g(\mu)$ for some function $g$ and $\bar{Y}$ ...
18 views

### How can I control for trade between UK and Australia in my difference-in-difference trade model?

I am doing a report on whether environmental regulation has an impact on trade, using a difference-in-difference model and seeing whether the EU Industrial Emissions Directive had an effect on UK ...
15 views

### Unbias, consistent,efficent estimator [closed]

I would like to ask for an example of estimator for the following: 1. unbiased+consistent (Is it the mean/sample variance?) 2. bias +consistent 3. unbiased + inconsistent 4. biased + inconsistent
24 views

### Probit with panel data - assumptions violated with endogenous covariate?

I am trying to understand how does the fact that a regressor is endogenous (as a result of reverse causality) in a dynamic probit model violate any assumptions that I may need to make for this model. ...
35 views

### What is the optimal forecast for the following moving average model?

Suppose that we have an MA(1) model where $y_t=\epsilon_t-\frac 1 2 \epsilon_{t-1}$ and $\epsilon_t$ are i.i.d. I want to find an optimal forecast of $y_{T+1}$ in the form of $Cy_T$ where C is a ...
37 views

### Microeconometrics course vs time series

I am currently a graduate student in Operations Research and I would like to learn econometrics, as it is not a part of the core curriculum. I am comfortable with matrix algebra (many courses used ...
22 views

### Calculating elasticity between log term and non-log term

Given the following, I am asked to calculate the elasticity of wages with respect to age: $$𝑙𝑛(𝑤_𝑖)=𝛽_1+𝛽_2𝑎𝑔𝑒_i+𝛽_3𝑎𝑔𝑒^2_𝑖+𝛽_4𝑌_𝑖+𝛽_5𝑇_𝑖+𝛽_6𝑀𝑎𝑟_𝑖+𝜖_𝑖$$ How does one ...
25 views

### Calculating elasticity between terms in a regression equation

Given the following regression: $ln(w_i)=\beta_1+\beta_2age+\beta_3age_i^2+\beta_4Y_i+\beta_5T_i+\beta_6Mar_i+\epsilon_i$ I am asked to calculate the elasticity of wages with respect to age. Is the ...
73 views

### Why cannot I compare AIC values obtained from nonlinear least squares and the ordinary least squares?

I have a time series dataset on UK consumption. I can (1) estimate an exponential trend (2) take the logarithm of UK consumption, estimate a linear trend for this logarithm, and exponentiate the ...
238 views

### How does one deal with trending variables in Linear Regression?

I have a linear regression model with two independent variables that takes the form: $$y_{it} = \beta_{0} + \beta_{1}x_{it} + \beta_{2}z_{it} + u_{it}$$ where $u_{it}$ is the error structure. I want ...
36 views

### What is the difference between Q4/Q4 and Y/Y GDP growth?

Per US media, the US economy grew 3.1% in 2018 Q4/Q4 and 2.9% in 2018 Y/Y. 2.9% seems the reference number in various databases (World Bank, Reuters, Bloomberg, etc) but what exactly does Q4/Q4 mean ...
25 views

### Cointegration but no Granger causality

Suppose I have two variables - $y_t$ and $x_t$ - which are cointegrated. I believe that (i) $y_t$ responds to deviations from the long-run equilibrium, (ii) the long-run elasticity of $y_t$ with ...
20 views

### GDP(Expenditure view of GDP): /Why aren't investments categorized as non-final goods?

My understanding is that consumption = consumption of final goods = whatever consumers buy from companies (with an adjustment for export-import-process + maybe housing is slightly different (not ...
35 views

### What is the purpose of multiple regression?

For instance, consider the following regression equation $College Score=\beta_0+\beta_1HighSchool GPA+u$. We interpret this $\beta_1$as the effect of a higher High School GPA holding all other ...
18 views

### Annual Fraud Recovery Over Time: Should I adjust for inflation?

I have a dataset of the total amount the U.S. Department of Justice obtained annually in settlements/judgments of government fraud cases from fiscal years 1988-2019. There's a lot of variation, but ...
40 views

### Why don't researchers use regularized probit model?

I know that a regularized logistic regression can be done to reduce training error, but I haven't found any economics research that uses a regularized probit model, only a regular probit model from ...
29 views

### How are low/middle/high classes defined mathematicaly?

I am only looking for mathematical references. I think this belongs to econometrics but am not sure nor where to look at it specifically. I suspect the definition is given with some kind of weighted ...
45 views

### Can logarithm and polynomial transformation be included in the same equation

Is it allowed to include logarithm and polynomial tranformations in the same econometric model. For instance : $$Y = x_1 + \log(x_2) + x_3 + x_3^2$$ I didn't find any interdiction however it seems to ...
11 views

### Where to find a list of U.S. policy changes for causal studies?

I'm currently trying to figure how the topic of my paper, which is supposed to be related to policy evaluation (causal inference). I thought it would be great if I could first obtain a list of recent ...
34 views

### Meaning of regression coefficients

I am having some trouble understanding exactly what is meant by the "true" Regression coefficients. Let's say it is stated that "the true regression coefficients are given as $y=a+bx+e$ where the ...
38 views

### Johansen test explanation

I am trying to understand the whole Johansen procedure via wikipedia and some other articles and I'm a noob in econometrics so there is a lot of notation and jargon that I think I am not familiar with....
27 views

### Logistic regression: Equation for marginal effect at the mean

I am estimating the following logistic regression (binomial family) by maximum likelihood: $$\ln\left(\frac{Y}{1-Y}\right) = \beta_{0} + \beta_{1}D + \beta_{2}X + \epsilon$$ where D is a dummy. ...
44 views

### What defines a data generating process

Let’s say we have a certain DGP $y=c+ax+bz+ error$. I take this to mean that conditional on the values of $x$ and $z$ in a certain instance (and no additional information )the expected value of $y$ ...
45 views

### Omited Variable Bias and descriptive statements

Let's say $y=c+ax+by+error$ (where the error term fulfills all the assumptions) descibes reality. If we have $z=vx$ than $y=h+max+s$ will also describe reality. When reading about OVB I have seen ...
31 views

### Forecasting quarterly EUR/USD exchange rate

My aim is to forecast the one-quarter ahead EUR/USD exchange rate. I have constructed a regression model with the following as explanatory variables: exchange rate in the previous quarter, EUR/USD ...
61 views

### Questions about the future of macroeconomic modeling and the role of simultaneous equation systems

I started to study about macroeconomic modeling and I am interested in the following questions. I understand that there are no definite answers to these questions. But I am interested in the opinion ...
11 views

### Measuring time discount in scheduled services: is there a literature in empirical economics?

Prices might be different, for the same service at some date, if you try to acquire the service two weeks in advance and again at a closer date (e.g. two days prior to the scheduled date), such as ...
25 views

### Can you take the moving average of quarterly data of an explanatory variable in a regression to smoothen noise and get more accurate coefficients?

I'm trying to use acceleration of quarterly data on household debt (the difference in the difference in debt) in a regression on unemployment (only concerned with correlation) but quarterly data is ...
32 views

### Simultaneous Equations Models in R

I use the systemfit package to evaluate Simultaneous Equations Models (for example 2SLS). But I do not understand how to predict endogenous variables using the new ...
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### What's the difference between true simultaneity and apparent simultaneity?

The definitions I find were: True simultaneity: Decisions can be made simultaneously by agents. Apparent simultaneity: Aggregation of causal relationship over agents over time. But I don't ...
27 views

### Interpretation of dummy variable : Random Effects Model

I am running a RE regression and I have export similarity index between two countries as the dependent variable and have a dummy variable such as share a border(=1 if countries share border, 0 ...
33 views

### Detecting Multicolinearity

Are high R square and low t-stats a signal for multicollinearity? What is the nature of this problem and correction? Also, how do you generally decide if the problem is high enough to be corrected?
13 views

### Diff in diff on model generated data

I have a structural model calibrated to N different locations and am running a series of counterfactual experiments. When I present the results for each experiment for each of N locations in tables, ...
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### Are CPI stats weighed based on population size

Generally inflation and CPI are reported on a national level. If a country for example has 10 cities, after surveying prices in each individual city, how is the total CPI number determined for the ...
31 views

### Dimensional analysis of GDP

The GDP is sometimes given by $$GDP=P\cdot h\cdot e \cdot F$$ Where $P$ is the Productivity, $h$ is the number of hours worked, $e$ is the employment rate and $F$ is the size of the labor force. ...
18 views

### How do I run a regression with the restriction that one set of parameters are proportional to another?

I'm running a regression with a set of 3 dummy variables (for four categories of a variable) and these 3 dummies interacted with a continuous variable. I want to impose the restriction that the vector ...
38 views

### How to use an instrumental variable to estimate the parameter?

I have the following linear model of log wages (w) explained using years of schooling (S), years of experience and its square $(E,E^2)$ and 3 dummy variables indicating whether the individual was ...
18 views

### ragged edge concept

I'm confused by the concept of the ragged edge in real-time data analyses. I understand that data for $x_t$ comes in various forms: a first estimate, a series of additional estimates and, after some ...
38 views

### Linear Probability Model Instead of Logit in Fixed Effects Regression

In our panel data analysis we estimated a fixed effects linear probability model (LPM) instead of a fixed effects logit regression because our sample size was quite small (600 individuals) and the ...
14 views

### Does income equality correlate with less fraud?

If a population of people have less disparate income levels among themselves, are we able to predict anything about the level of phone scams, phishing emails, etc. perpetrated by members of that ...
37 views

### How to show that the estimator is consistent?

$Y_i=\beta_0+\beta_1X_i+U_i$ is my regression model for an I.I.D. sample with N=1000 observations. Suppose $U_i\sim I.I.D.(0,\sigma^2)$ and Xi are also I.I.D for i=1,2,3......1000. Xi is independent ...
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### Difference between no perfect multicollinearity and no multicollinearity

Some textbooks (for example, Introductory Econometrics: A Modern Approach by Jeffrey Wooldridge) assume that no perfect multicollinearity for the OLS regression, while others (for example, ...
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### How to test if the effect of one regressor entirely comes from other regressors?

I have a regression model that includes IQ test scores as the dependent variable; my own education, my father's education and my mother's education as independent variables. Suppose I want to know ...
Let $x_1, ..., x_n$ and $y_1, ..., y_n$ be two independent random samples from $X$ and $Y$. We have $µ_X = E (X ) > 0, µ_Y = E (Y ) > 0$ and $σ^2_X = Var (X )$ and $σ^2_Y = Var (Y )$. Derive ...