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

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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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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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26 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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30 views

If the null hypothesis is true, how will the test statistic be distributed?

I went with T~(50-6) The question goes.... "A regression is estimated with 50 observations, five explanatory variables and with a constant. Suppose You want to test the following hypothesis $H0: ...
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1answer
37 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
68 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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16 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
43 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
56 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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12 views

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
334 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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44 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
36 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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6 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 ...
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19 views

Test whether cross-sectional dependence in panel data follows known (network/spatial) structure

I want to test whether cross-sectional dependence in one specific variable (y) in panel data format follows a known structure (W) (e.g. network, spatial dependence), after controlling for individual ...
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14 views

Key ways to compare two multivariable regression models?

The question goes "Compare Model 2 and Model 3 and choose a preferred model based on accordance of estimates with prior expectations and which one better addresses the characteristics of the data as ...
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22 views

In a multiple regression model what do the coefficients mean if you're asked to take the log of only dependent variable y

So Say like... $ln(y) = \beta_1+\beta_2x_1+\beta_3x_2+\beta_4x_3$ I only know of the interpretation when they're all (rhs and lhs) are converted in log it tells us elasticity. I dunno about this one. ...
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30 views

Multiple regression model and prediction/confidence interval for two values of a coefficient

Hi i've been working on this model of house prices based on multiple independent variables. I got the out put out throught gretl. ...
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13 views

Which methodology do I follow to regress sales data of various companies versus common entity (GDP)?

Which method do I use to collectively regress the sales value for several companies collectively against the dependent macroeconomic indicators such as GDP? The sales value change company wise every ...
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0answers
21 views

Characterizing weak instruments bias with more than one endogenous variable

With a single endogenous variable, it is well known that a weak instrumental variable (or set of weak instrumental variables*) will bias 2SLS estimates toward OLS estimates. But how can one ...
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29 views

Interpreting level-level models with units in %

I have a model where the dependent variable is GDP growth in (%). I regress this on a my variable of interest, wine sales ($). Do I have a level-level model? Growth = a + Bwine + u How do I ...
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17 views

Poisson Regression - missing data, imputation, distribution of fitted values

I'm working on a school project concerning Poisson regresion. I'm trying to build a model for number of cars in household base on American Community Survey. Among explanatory variables are value of ...
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13 views

Preserving/including multiple observations in unbalanced panel data

I'm analyzing the antecedents and consequences of acquisitions on technological performance of firms using panel data in Stata. The data include categorical (binary) and count variables. The most ...
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24 views

How do I interpret weak exogeneity in an ADL model?

First year econ graduate student here; looking at an ADL (Autoregressive Distributed Lag) model for the first time. Consider $Y_t = \omega Z_t + \alpha Y_{t-1} + \beta Z_{t-1} + \mu + \epsilon_t$, ...
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1answer
31 views

How to calculate $\phi$ (phi) - a first order autocorrelation coefficient

I have a dataset of historical quarterly earnings per share for 8 years. I am trying to use the following formula for the purpose of estimating earnings: $E(Q_t) =Q_{t-4} + \phi_1(Q_{t-1} - Q_{t-5}) ...
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10 views

Optimal Predictor under symmetric loss [self-study]

I am seeking to prove that, under symmetric squared error loss $C(e)=e^2$ where $e$ is the forecast error h periods ahead $e=y_{t+h}-\hat y_{t+h}$, the optimal predictor $\hat y_{t+h}$ = ...
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1answer
44 views

OLS versus IV regression results

I am doing an IV regression after OLS. From OLS I get significant results but I want to control for endogeneity and check reverse causality. So when I do IV, the sign of my main explanatory variable ...
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32 views

loan default model

I have a loan dataset that includes all the loans originated from 2000 through the most recent quarter. For each loan, available are information at origination, such as loan size, FICO, LTV, LTI ...
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22 views

Sequential mutually exclusive signing-bonus offers (A variant on the Secretary Problem)

How much should you offer a potential hire in a signing bonus? Imagine you are interviewing a list of candidates for a particular job. Each candidate has a "lifetime value", and probability of ...
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31 views

Inverting a VAR - 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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1answer
53 views

Can I say that residuals are white noise?

I want to check whether residuals are white noise or not. When I look at the plot, all lags do not pass(exceed) the significance band except for fourth lag. However, fourth lag's p-value of 0.228 is ...
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28 views

Dectect White noise ACF - PACF Eviews

I found PACF and ACF like the following table . But, how can I decide whether there exists white noise? And what is white noise? If there is white noise, how can i build my best fit model with ...
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21 views

How to interpret a discrete variable in regression model

I have a regression model where the dependent variable is logarithm of miles per gallon and several IVs. One of the IVs is ...
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15 views

Log-Log transformation of a regression model

I am creating a regression model project to my econometrics lecture. Because of the heteroskedasticity I have to transform the model somehow. The way I used is log-log transformation. My question ...
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1answer
38 views

Variable with constant difference in time, Fixed effect estimator

Suppose I want to estimate such a model: $$ w_{i,t}= \gamma_0+x_{i,t}\gamma_1 +age_{i,t}\gamma_2 + \alpha_i+\lambda_t+\epsilon_{i,t} $$ This is of course a model with both individual and time fixed ...
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40 views

Minimizing absolute devitation using median

I need to prove that the expectation of absolute deviation is minimized by the median. We are given that $$med(y|x) = \beta_0 + \beta_1x$$ and $x$ can take on three values with positive probability: ...
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44 views

Unbalanced Panel data using R - Removing outliers and heteroskedastcity

I am new in R and it’s my first time using it so I’ll appreciate the help. I am estimating income elasticity for electricity consumption using budget shares. I have data for 8 regions categorized into ...
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36 views

Does a stationary process necessarily have to be mean-reverting?

I wonder about if a stationary process is by definition mean-reverting too. I know the formal definition of a stationary process, but I'm not sure about the definition of a mean-reverting process. ...
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25 views

Which Hessian to use to compute standard errors

Let that I have a data vector $\textbf{x} = (x_1,x_2,x_3....x_n)$ Say these are realizations of IID random variables having a common density $f_\theta$ Likelihood computed using $i^th$ observation ...
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68 views

Delta Method to Compute Standard Errors of Transformed Variables

I am estimating a a finite mixture model to identify proportions of four behavioral types using an experimental dataset. This dataset has data for 500 individuals and each individual has 30 tasks. In ...
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35 views

VECM model output - where is the long run relationship?

So I'm getting the following EViews output, but where on earth is the long run relationship? Do I have to estimate it separately using OLS? If you have to estimate it yourself via OLS, I've already ...
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21 views

On the use of the autocovariance generating function

The autocovariance generating function is defined as: $$g_X(z) = \sum_{h = -\infty}^{\infty} \gamma(h)z^h.$$ Where $\gamma(h)$ is the autocovariance function of the considered process $X$. I can ...
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4 views

Value added composition by sector

I am trying to make graph of value added composition by sector based on world bank data (http://data.worldbank.org/indicator/NV.SRV.TETC.ZS?display=default), but when i extracted data for industry, ...
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1answer
23 views

Estimating Markov Switching Probit

I attempt to fit the following probit model to a time series where we observe the binary variable $R_{t}$ and another variable $X_{t}$, a latent unobserved variable $y^{*}_{t}$ and a state variable ...
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1answer
37 views

An example of Instrumental Variables use

In the following example of Greene's Econometric Analysis, he writes at a certain moment: «If the number of weeks worked, and the accepted wage offer are determined jointly, then $ln Wage_{it}$ and ...
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36 views

Econometrics - Relationship between cointegration and ECM

I'm pretty new to econometrics and I've been taking a class at university which uses the book "Econometric theory and methods" by Davidson and MacKinnon. It's a pretty good book but there's one thing ...
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66 views

Time series and EViews

I have 3 questions on EViews: m, x, and y are three series. I have found that $m \sim I(1)$, and $x \sim I(2)$,and $y \sim I(2)$ Firstly, can I generate first degree difference by writing " d(m) " ...
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36 views

Endogenous interactions in nonparametric instrumental variables

I'm interested in estimating a model along the lines of $$ pr(y==1) = g^{-1}\left(f(x_1,x_2)+X'\beta\right)+\epsilon $$ where $g$ is logit and $f$ is some smooth function. I'm using GAM's in ...
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35 views

Doubt on the Johansen Procedure and normalization of the cointegration matrix in R

I'm a beginner at Econometrics, and I'm trying to learn the main econometric techniques in R. My doubt is on how to normalize the cointegration matrix to ensure ...
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34 views

Vector autoregressive model selection process and relationship with cointegration

Let's say you're looking at two securities that trade closely with one another and you suspect you can somehow trade the spread. How can you use VAR models to estimate the relationship between the ...