Econometrics is a field of statistics dealing with applications to economics.

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Different interpretations of the identification mechanism for the same econometric model

Consider two identical econometric models used by two different papers but with different interpretation of the identification mechanism. The first paper by Ruhm 2003 (page 9) has the following ...
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20 views

Fixed Effect Regression vs. ANOVA

I have background and better understanding in scientific experimental design but currently I am working on a project involving the application of environmental econometric. I notice that economists ...
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18 views

Cointegration in R - Standard error, test statistic and p-value of weights

I'm using urca package in R version 3.2.1. I used ca.jo function on a set of I(1) regular time series variables - taking two at ...
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1answer
28 views

Seemingly unrelated bivariate probit for endogeneity: interpretation of Rho

I would like to estimate the effect of health insurance coverage on type of healthcare provider chosen--either public or private--at last illness using a nationally representative sample of people in ...
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1answer
50 views

Multivariate OLS - Partialling Out

I have bee wondering why in a multivariate OLS-Regression it is not possible for R² to decrease when increasing the number of explanatory variables. The Point is that for example in the model ...
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1answer
34 views

What value does one set, in general, for the null hypothesis of β0 in a linear regression model?

Say there is a linear regression model to estimate Y, that is: $Y_i = B_0 + B_1X_i + u$ When testing the significance of your sample regression model the null hypothesis for $B_1$ would naturally be ...
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67 views

Analyze trend given a set of points

Suppose I have a set of N values representing EUR/USD rate... [ 1.10 , 1.20 , 1.25, 1.20, 1.19 ] Which is the simplest way for analyzing if values tend to raise or tend to fall? I'm looking for a ...
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16 views

Maximum lag selection for panel unit root tests

I am interested in conducting panel unit root tests on a panel of subregional annual data where N>100 and T<10 (more specifically, depending on the independent variables included in each ...
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14 views

First order condition of HP Filter

The HP Filters for growth and cyclical components is written as: $$\min_{g_t}\sum_t \left[(y_t-g_t)^2+\lambda\left[(g_{t+1}-g_t)-(g_t-g_{t-1})\right]^2\right].$$ Hodrick and Prescott, on their paper ...
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1answer
14 views

Comparison of time series models

I'm trying to create a model for a series $X = \{X_1, X_2, ...\}$. I don't assume that the $X_i$ are identical distributed nor that they are independent but at least that they have something in common ...
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22 views

Partially Endogenous Variables in a Panel Dataset

In the framework of a fixed effects model: Y$_{it}$ = X$_{it}$ + Z $_{it}$ + $\alpha$$_{i}$ + $\theta$$_{t}$ + $\epsilon$$_{it}$ what is the standard way to capture the unbiased effect of Z, in the ...
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18 views

Valid Instruments for an IV/2SLS Regression for house prices

I'm brand new here so my apologies if this is too general or has been answered elsewhere. I'm trying to estimate a model for the house prices that includes several endogenous regressors. For the sake ...
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21 views

Promotion analysis with regression, negative coefficients

I used multiple linear regression to model promotion effects on sales on sample retail store, but some coefficients becomes negative. As a business interpretation, should I consider these promotions ...
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1answer
39 views

ACF of MA(2) with constant

Consider $$Y_t =5+u_t-0.5u_{t-1}+0.25u_{t-2}$$ Because the regression has a constant (5) this is still valid? $$\rho_1=(θ_1+θ_1θ_2)/(1+θ_1^2+θ_2^2)$$
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12 views

Use SUR to measure unobservable effects?

My title is a littel bit ambiguous. I'm working on a project on measure the degree of sorting in housing market,put it simple, sorting refers to people with similar characteristics tend to live in ...
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23 views

Computing marginal posterior in a multivariate setting

I am computing posteriors using individual level data and would like to know if my formulation in the end is right. Let the sequence of choices made by individual $i$ be $y = y_1, y_2 ......y_j$ in ...
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1answer
24 views

Log linear model interpretation - % Contributions?

I know that for log-lin models the interpretation for the coefficiente is this one, that is: Coefficients⋅100 have a semi-elasticity interpretation: for a 1 unit change in x, you get b*100% change in ...
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1answer
60 views

Does it make sense to interact two continuous variables in econometrics?

Let's say I have three variables: Variable A, B and C, where C is the product of A and B. Both A and B are continuous variables. If I regress Y onto A and B, A is significant and B is not. Then, if ...
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27 views

Finding “partialling out” of regression

I have the following model $y= \beta_0 + \beta_1x_1 + \beta_2x_2+ u$ How can I find the "partialling out" interpolation of the regression estimator $\widehat{\beta_1}$, using the following formula: ...
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1answer
41 views

Using a Dummy Variable to Control for Great Recession data

I am looking to produce a forecast with a quarterly dataset of sales. I only have so many year's worth of data post-recession and I want to investigate including more datapoints, which would mean ...
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1answer
40 views

Estimating Price Elasticity

I'm having trouble coming up with a way to estimate price elasticity for my ticket sales data. Tickets go on sale 15 days before the event, and demand increases as the event comes closer. Prices stay ...
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8 views

How many observations should I have to perform out of sample tests

I want to be able to compare 2 RMSEs but I only have 7 years of monthly data. Is 1-2 years of monthly data enough to be able to have any faith in the RMSEs of my models?
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1answer
35 views

Combining Forecasts

I am in the process of creating one well-rounded forecast, and in my research I found a few mentionings approving the use of several forecasts combined into one. I really like this idea but I have ...
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1answer
32 views

What is the link between the logit and the probability of a binary event?

Reading about logistic regression model, I wondered about the link existing between the logit (or $log\frac{p}{(1-p)}$) and the probability of an event defined as binary by assumption and modeled by ...
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1answer
33 views

Coming up with a statistically accurate formula

I've just recently become fascinated by the world of statistics and I have a question. I want to come up with a formula to evaluate quarterbacks in the NFL based on 5 independent variables, which lead ...
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1answer
32 views

Is OLS in Engle-Granger a valid method to use when finding the cointegrating vector?

In this post mpiktas showed that the sample correlation measure for two random walks (possible correlated) is a random variable and does not estimate the theoretical correlation. When trying to find a ...
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34 views

Use adjusted R-squared to select between regression models

I use the same sample to run two regressions. Both regressions have the same dependent and independent variables except in one regression the dependent variable and one of the independent variables ...
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12 views

cluster standard errors with small group sizes but large number of groups

I have tried looking for cluster standard errors and the only reference that I found are that problems will arise if the group is small but group size is large. However, in the case when group size ...
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34 views

Econometrics heteroscedasticity model

Consider the following model for real estate values applied to a cross-section of homes: ${\rm Price} = \beta_0 + \beta_1\cdot SQFT_i + \beta_2 \cdot YARD_i + \beta_3 \cdot POOL_i + \epsilon_i$ ...
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3answers
85 views

Elasticity calculation on real data

I have data set on several SKU (within one Brand, which were divided by 3 groups) daily demand and prices during one month. Prices were fixed in this period. After this period we begin to increase ...
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17 views

Model with two ordinal variables

I have question about the ordinal variables in model and using them correctly. Let's say I have a model that explains income by education and age. Age is continous and education is ordinal ex. can be ...
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1answer
22 views

Is it possible to run the same set of independent variables with different outcome variables? [closed]

I was wondering if it is possible to make any economic implications by regressing the same set of independent variables with different outcome variables. For instance, running [Industry, Years, ...
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1answer
22 views

Coefficient of determination increases with the number of regressors

Suppose we deal with the linear regression model $Y=X\beta+\epsilon$, where $X$ is determined matrix, $\beta$ - the vector of coefficents, $\epsilon$ - the vector of errors. I often meet the ...
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1answer
57 views

Regression variable trick

I am working with a set of data with a single dependent variable $Y$ and many potential explanatory variables $c_1,\cdots, c_n$. When I define another variable as $c_1*c_2/Y$, I find that it with a ...
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How to apply non-parametric methods to panel data? “The Elite Illusion: Achievment Effects at Boston and New York Exam Schools”

I'm studying this paper The Elite Illusion: Achievment Effects at Boston and New York Exam Schools. There the authors use a fuzzy regression discontinuity design experiment to assess the ATE of going ...
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15 views

All of the series used in a model must be stationary at the same order of differencing

While practicing VAR analysis, all of the series used in the model must be stationary at the same order of differencing. Is this correct? For example, let $X$~$I(1)$ and $Y$~$I(2)$. Can I use these ...
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1answer
40 views

Changes in F-value of instrument

I am using 2SLS to estimate the effect of education on the probability that one works. In the first stage I regress education on my instrument and the other exogenous control variables. The same ...
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28 views

How to treat missing values in a regression?

I have used the logarithmic form of wage as my independent variable in Stata. However, it contains missing values. Should I replace these with 0 or let them be?
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1answer
35 views

Is series cointegrated if residual is stationary under time-varying coefficient regression?

Traditionally, if $x_t$ and $y_t$ are both $I(1)$, they are cointegrated when there exists some linear combination $z_t=y_t-$$\gamma$ $x_t$ such that $z_t$ is stationary or $I(0)$. My question is if ...
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38 views

How to interpret the coefficient of tax rate

I have used the marginal tax rate as an independent variable in my regression. The data is in decimals, meaning it is lesser than 1. How do I interpret its coefficient if the dependent variable is no. ...
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1answer
48 views

If $ln(y) = 5 - 0.1X$ what is the elasticity of Y with respect to X, when X=10?

So i got the following model $\log(y) = 5 - 0.1* X$ ...The question is "The elasticity of $Y$ with respect to $X$, when X=10 is..... " i said -0.1 but apparently i'm wrong Isn't the coefficient ...
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1answer
89 views

How do you calculate the test statistic of a hypothesis test with more than 1 parameter?

I am interested in testing the following hypothesis: \begin{align} \newcommand{\var}{\rm Var} \newcommand{\cov}{\rm Cov} \newcommand{\se}{\rm se} H_0\!:\ B_2 + B_3 &= 1 \\ H_1\!:\ B_2 + B_3 ...
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22 views

How to find changes in proportions using regression?

I want to test the hypothesis that the expansion of lending institutions changed the goals that households obtained their loans for. In other words, say in 1950 the breakup was: 33% got loans for ...
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2answers
52 views

What does “special case of GMM” mean?

I was researching purchasing this text book: http://www.amazon.com/dp/0691010188/ref=wl_it_dp_o_pd_nS_ttl?_encoding=UTF8&colid=2QTISO1Y8TYVW&coliid=I3FUEFWL47AC4L In its description it talks ...
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1answer
91 views

Deriving likelihood function for IV-probit

So I have a binary model where $y_1^*$ is the latent unobserved variable and $y_1 \in \{0,1\}$ the observed. $y_2$ determines $y_1$ and $z_2$ is thus my instrument. So in short the model is. ...
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Bayesian VAR, IRFs and unit roots

I estimated VAR using Bayesian inference. Then I calculated roots of the characteristic function of this VAR. The biggest root was greater than one. Also I tried to make all series stationary before ...
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4answers
399 views

Regression Developing Countries: GDP-Growth or GDP

For my master thesis I basically want to find out, why developing countries are stagnating. Next to theoretical aspects I also want to make a regression. I want to regress GDP or GDP growth as ...
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58 views

Cross Country Analysis Time Series

I'm pretty newbie in econometrics, I'm writing a research proposal, and I was wondering if you guys can give your opinion or some hints regarding an idea. My dependent variable is a measure of ...
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1answer
64 views

Heckman two-step regression estimated covariance matrix in R

While using R for estimating the Heckman 2-stages model a friend stumbled on a problem. the selection() funtion from the package sampleSelection estimates everything just fine. The code is as follows. ...
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9 views

Seasonality in Modeling Population

To conquer the effect of seasonality in data, it is recommended to take multiple sample windows, with each having equal performance window. Question - Should we discard seasonality faced sample ...