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

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Augmented Dickey-Fuller Trend and Intercept

I am trying to determine if I should include an "intercept" or a "trend and intercept" when using the Augmented Dickey-Fuller (ADF) test. I ran a regression with my dependent variable and a time ...
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12 views

Construct confidence interval for price per area, from weighted average price for quantity, and weighted average quantity per area

I have function for obtaining the weighted mean for price per quantity, where $p$ is price, and $w$ is the weight, for some product $i$. $$\bar p_a = \sum p_{i} w_{i}$$ and a quantity per area, ...
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35 views

White noise ACF - PACF

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 no white noise, can I say being stationary?
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1answer
22 views

Identities in a VAR model

I am working on a VAR model where one of the equations is an identity. For example: $$ \begin{cases} A_t = \alpha_{11} + \alpha_{12} A_{t-1} + \alpha_{13} B_{t-1} + \alpha_{14} C_t + ...
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29 views

Incorporating intraday data into end-of-day forecast

my target variable is observable intraday but I am interested only in EOD forecasts. I will denote the variable $\ y_{D,24}$ as the reading of interest for day D is ...
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25 views

Which program for PVAR? [on hold]

I have been looking at some studies that use panel vector autoregression models. The problem is, I can't find which statistical package the authors use. I would like to estimate impulse responses in ...
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11 views

Econometrics 2: Covariance (xt, xt+1) in Moving Average process of order 1,

Could you help me to show that if X(t+1)=e(t+1)+alpha(1)*e(t), Then Cov[x(t), x(t+1)]=alpha(1)*Var[e(t)] Thank you very much, your help is appreciated
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1answer
39 views

Converting Annual GDP Growth Rate into Monthly GDP Growth Rate

I am researching the effects of Euroarea fiscal stimulus on inflation expectations during the crisis. The data for fiscal stimulus is given as an annual percentage of GDP, e.g. 1.5% of Euro Area GDP ...
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1answer
55 views

ARIMA Specification from Correlogram

How should I determine the data generating process from the correlogram below? This is non-seasonally adjusted monthly data that has been 1st differenced. I am trying to conduct univariate time ...
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9 views

Panel model Estimation - 5 and 10 years Break [migrated]

I am trying to estimate the relationship between inequality and growth in a panel data of 22 countries for the period from 1985 to 2010, using fixed-effect and random effect. I want to use 5-year and ...
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22 views

Who to credit for “control functions” in econometrics?

The idea is pretty simple, and I think it came out sort of by-the-way in a paper about something else, so I'm having a hard time figuring out who to cite. Basically you've got a GLM (like a probit or ...
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18 views

Autoregressive Model

I am currently attempting to build a regression model explaining Current Inflation as measure by monthly CPI. I am considering the following model; CPI = B0 + B1(LAG_CPI) + B2(Lag_Oil_Price) + ...
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1answer
32 views

Instrumental variables and noisy measurement

I am interested in the effect of the unemployment rate at the time of labor market entry ($u^{LME}$) on wages later in life (this is an old question, but I have a new data set). I'd like to run ...
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0answers
17 views

How to remedy seasonality in a multiple regression model

I am trying to build an economic model using multiple regression, and I am not sure how to remedy seasonal effects. I am collecting data across several different variables, and building three models ...
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1answer
32 views

Combining propensity score matching with 2SLS

Inspired by the probit 2SLS estimation (see e.g. Wooldridge p.623, procedure 18.1 or check here probit two stage least squares), I am wondering if instead of running a Probit in the very first step, I ...
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4answers
95 views

Econometric Model and deciding the frequency of data collection

I am looking to build an econometric model and I am wondering if using annual data vs monthly or quarterly data is going to produce a less accurate model. If the dependent variable is affected by ...
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0answers
24 views

How to incorporate exchange rates in a multi-country econometric model?

I have for 12 countries variables related to the trade of one specific commodity (production, consumption, import, export, trade costs, and international prices). The data range is 2000-2013 with a ...
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3answers
155 views

Is there a way to allow seasonality in regression coefficients?

Hi I am newbie here and hopefully this is not a dumb question. Say I have a time series, Gt, and a covariate Bt. I want to find relationship between them by the ARMA model: Gt = Zt + β0 + ...
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44 views

Transforming Series with 2nd Moment Nonstationarity

I am trying to induce stationarity in this series. I have graphed a range-mean plot to detect 1st and 2nd moment nonstationarity. Can anyone suggest a transformation that will remedy the 2nd moment ...
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0answers
36 views

When to winsorize?

My final dataset results from combining different databases,randomly choosing 150 agents and manually collecting data. In addition, it is a panel dataset and not all agents have observations in every ...
3
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3answers
57 views

Clustering in Instrumental Variables Regression?

I am wondering whether clustering in IV estimation would mean I have a fixed effect for both error terms or just for the structural error. For example, in the model \begin{eqnarray} y = X \beta + ...
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1answer
23 views

How to test one variable in a panel for cross-section dependence?

The plm::pcdtest function implements Pesaran, (2004) General Diagnostic Tests for Cross Section Dependence in Panels. For example a test for a panel model works as ...
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1answer
98 views

Dummy variables to control for clustering

I have a panel-data sample which is not too large (1,973 observations). The unit of analysis is x (credit cards), which is grouped by y (say, individuals owning different credit cards). I cannot used ...
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24 views

Imposing restrictions on a model of healthcare expenditures

Let $\text{hx}_i$ be total expenditure on healthcare by household $i$, $\text{inc}_i$ is a measure of disposable income for household $i$, and $\text{size}_i$ is the total number of persons in ...
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18 views

Reduced form and consistency of OLS

Hello I was wondering if someone could explain to me how to obtain the reduced form from the system below and why the OLS estimates would be consistent $n_t =β_0 +β_1i_t +β_2n_{t−1} +β_3i_{t−1} ...
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26 views

State Space model question

I am looking for some help with estimating Space state model of this form: $r_{t} = r^{*}_{t} + \pi + \varepsilon_{1}$ $R_{t}= r^{*}_{t} + \alpha + \pi + \varepsilon_{2}$ $r^{*}_{t} = ...
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11 views

Why are the least squares standard errors for the (unrestricted) ADL model are valid?

Consider the model $\Delta y_t =\beta_0+\beta_1 x_t+u_t$ where $u_t=\phi u_{t-1}+\varepsilon_t$; the $u_t$ are IID. If we write this in ADL form there are restrictions on the parameters. Why are the ...
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1answer
44 views

In absence of a constant, no need for $Cov(Y_i,\epsilon_i)$ just $E(Y_i\epsilon_i)$

We have the following simple linear model: $C_i=kY_i+\epsilon_i$, where $\epsilon_i$ is the error term. In a book I'm reading, the author states that due to the absence of a constant, we do not ...
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2answers
32 views

How to set constraints in Garch parameters estimation by using Stata

I am trying to implement three types of GARCH model, namely Garch(1,1), GJR Garch and EGARCH. However, I keep obtaining a persistence above one, while for the purpose of my assignment I need a ...
3
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1answer
49 views

Intuitive meaning of error-in-variables

I understand the explanation of the example of error-in-variables used wikipedia. What I do not understand is how could we explain intuitively the error-in-variables problem? One way would be to say ...
3
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1answer
69 views

Identifying $\beta_1$ with one instrumental variable and one exogenous variable

$\textbf{Question:}$ Suppose we have ${(Y_i, X_i,Z_i,W_i)^{n}_{i=1}}$ which is a random sample from the joint distribution of $(Y,X,Z,W)$ that satisfies the following relation: ...
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25 views

Rule of thumb for excluded variable in Heckman selection model?

I'm working on a project that involves the use of a Heckman selection model (more specifically a Roy or move-stay model, which is essentially a two-sided Heckman) of the following form: $$ Y_{i1} = ...
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1answer
86 views

Fixed effects or Random effects model?

I am trying to understand the difference between fixed and random effects modelling. The panel data I have is in the form of basic longitudinal panel time series. I know that I can use the Hauseman ...
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1answer
90 views

Statistics for model selection and model evaluation

In his Dynamic Econometrics, David F. Hendry issues the following advice: When a 'test' statistic is cited, you must ask 'Was that a selection criterion statistic or a genuine test statistic?' ...
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2answers
75 views

How to deal with values that don't exist, as opposed to are missing?

I am working with a dataset where the dependent variable is $y$ (level of use of a line of credit) and the key independent variables are $x_1$ and $x_2$ (two different types of interest rates). Some ...
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10 views

negative b value but positive corelation [duplicate]

In a linear regression, I have 5 independent variables. All put significant impact on dependent variable $(p <.05)$. Four of the variables put positive impact but one independent variable in ...
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4answers
892 views

Why do we usually choose to minimize the sum of square errors (SSE) when fitting a model?

The question is very simple: why, when we try to fit a model to our data, linear or non-linear, do we usually try to minimize the sum of the squares of errors to obtain our estimator for the model ...
3
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1answer
58 views

Can I do panel regression if all my covariates are time-invariant?

We have a data set where our outcome of interest varies over 10 years, but the explanatory variable of interest and all of the potential confounders are time-invariant. I am quite certain that a panel ...
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19 views

How to compute the expectation of a normally distributed random variable given an imprecise signal?

Given $r\sim\mathcal{N}\left(\bar{r},\frac{1}{\alpha}\right)$ where $0<\bar{r}<1$ and an imprecise signal about $r$, $x_i=r+\epsilon_i$ where ...
3
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1answer
58 views

Residual based bootstrap autoregressive series in MATLAB

I have defined the model as follows. Let $$y_1 = 0$$ and $$ y_i = \alpha + \beta y_{i-1} + \epsilon_i $$ for $i_2\ldots i_T$, where $\alpha$ and $\beta$ are the estimated coefficients and ...
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0answers
21 views

Regresson Discontinuity - design questions

I am considering a regression discontinuity design (RD) where the "treatment" has a definite sorting rule (below the threshold, you are not fined - above the threshold, you are fined). The outcome I ...
3
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2answers
115 views

Does triple interaction need to include all main effect variables?

I have a triple interaction: AxBxD, where A and B are continuous variables and D is a dummy. My regression is Y = A + B + AxB + AxD + AxBxD In this case, do I HAVE TO include BxD also? In theory here ...
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25 views

Migration Flows and Multiple Regression Quadratic Assignment Procedures

I'm a forth year economics student (undergraduate) and last semester I wrote a research paper, with a classmate, in which we analyzed the determinants of interprovincial migration flows in Canada. It ...
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49 views

Finding a Random Variable $X$ on the sample space with given cdf

I will state the problem first, then follow through with my work. Q: Suppose that the sample space is given by $S={w_1,w_2,w_3}$ where $w_1,w_2,w_3$ are three states of tomorrow's weather. We have ...
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1answer
73 views

Best graduate level text for econometric time series?

I am a masters student studying economics. The program that I am attending is extremely quantitative with a heavy focus on econometrics. I am looking for a text on time series analysis. I really ...
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1answer
63 views

Joint significance test in 2SLS (instrumental variables) regression

I'm trying to implement a joint test of the two coefficients comprising a quadratic term in a 2-stage least squares regression. The quadratic term is endogenous. I'm using ...
3
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1answer
58 views

How to use the bunching estimator to estimate the elasticity of taxable income

Today my professor told us about a recent estimator that non-parametrically estimates the elasticity of taxable income. I understood why doing this gets around problems of previous studies that use ...
2
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3answers
300 views

Why “modeling volatility” is not an oxymoron?

Firstly, I'm sorry, if my question will come across as simple or even naive, but I have no formal background in statistics and I'm trying my best to learn it as much as I can, among other areas. My ...
3
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0answers
27 views

What is the ‘Pile-up Problem’?

In methods of trend-cycle decomposition, what is meant by the 'pile up problem'? How can the pile up problem be detected? Can it be detected by the method of visual inspection? If so, what are the ...
4
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1answer
37 views

Basic - Modelling Two Series, one is an index

I'm trying to model two time series. One is a seasonally adjusted # of new jobs number against and index of business development. Its been a long time since I took econometrics, so I'm hoping ...