Questions tagged [econometrics]

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

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8 views

Structural equation models in econometrics vs psychology, political science, etc

Can anyone tell me if the sort of the sort of simultaneous equation/structural equation modeling of economic relationships that that was championed and to some extent developed out of the Cowles ...
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1answer
43 views

Regression in linear equation vs. distribution form

In most introductory textbooks (less 'mathematical') simple linear regression model is formulated as equation. i.e. $$Y_i = \beta_0 + \beta_1 X_{1 i} + \epsilon_i, \quad i =1,n $$ $$ \epsilon_i \sim \...
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28 views

Running model without intercept term?

I have the true model set as y = b0+b1x+u. Now supposing that I'm running the model without the intercept term, Under what circumstances would the coefficient term in the model (without the intercept ...
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13 views

What could be the most appropriate ordering in data preparation?

Are there any references in the literature on what is (or could be) the appropriate oredering of actions taken in the data preparation stage: deflating (nominal to real) transformations (log, square ...
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19 views

Squared Residuals vs. Variance of Residuals (ARCH)

I understand the intuition behind finding autocorrelation between the squared residuals to test for time conditional heteroskedasticity, but does $\epsilon^2$ really show $Var(\epsilon)$? One ...
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8 views

Using Random Effects for ordered probit model

I am trying to estimate an ordered probit model, where the data in question comes from two separate counties. I was thinking that I should use fixed effects to account for unobserved heterogeneity ...
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19 views

Equivalency of the control function approach and IV

I am trying to see how these two are equivalent. So say Y = BX1 + e1, and x1 is endogenous. and say I have a Z s.t. E[Z'e]=0, and say the linear project of x1 onto z is given by X1= piZ + N. Now, if ...
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28 views

Modeling Pre-Trends in Difference-in-Differences

To get right to the point, the canonical difference-in-differences design is as follows: $$ y_{it} = \alpha + \gamma T_{i} + \lambda Post_{t} + \delta (T_{i} \times Post_{t}) + \varepsilon_{it}, $$ ...
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Synthetic Control method: how to select V matrix?

I am learning Synthetic Control method and reading paper."Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program" We need to minimize ...
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1answer
28 views

Generalized linear model (GLM) for panel data?

I have a panel data and what I need is to use generalized linear model (GLM), but I am confused; that is, I cannot find any related article in which they have used GLM for panel data. Can you share ...
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Interpreting results from OLS breakpoint test with dummy variables

I have estimated a regression and found a breakpoint using chow: Then I created a dummy variable which is 0 before the break and 1 from the break until the end. This is the result: I was assuming ...
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1answer
27 views

Is a least squares linear model useless if it has significant breakpoints?

My professor gave me some data to study basic econometrics and I'm trying to develop the best model possible to fit financial returns of a company based on two different stock indexes (one from the ...
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Is it a valid claim, that by differencing a time series, it loses its memory, and as a result its predictive power?

Marcos Lopez de Prado seems to be a well known and renowned machine learning expert in the field of finance. I am very far from his level, as have not yet finished my PhD in economics, and only have ...
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1answer
29 views

Can I remove a dummy variable when it is not significant by itself, but its interaction with another variable is?

I have the following model based on the financial returns of a company as a dependent variable of a stock market index, and a dummy variable interacting with USD exchange rates to my currency. The ...
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35 views

Panel Data for 20 countries with same independent variable for each country

I am analyzing the impact of US monetary policy variables on capital flows to emerging markets and intend to use panel data analysis. I have data on capital flows for 20 countries individually from ...
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7 views

Error-in-variables - Consistent estimator with lagged variable

my Econometrics teacher gave us an exercise and I can't get it, could someone help me, please? Suppose all assumptions of the classical regression model are satisfied. Suppose $y_t^*$ = $\beta$$x_t^*$+...
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Proving that average treatment effect for RDD with multiple cutoffs is a weighted average of the causal effect at each cutoff

Let $Xi$ denote the original running variable and $Ci$ be the cutoff that unit $i$ faces (e.g., the nearest cutoff). For simplicity, I consider a case where the binary treatment is assigned if $Xi$ ...
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13 views

How to correct for selection bias in a situation where usual Heckman correction won't do? Should I even do it?

I have a question about how to correct for selection bias in an experience. In this experience, we evaluate the impact of slight tweaks in phrasing on web surveys participation. For example, if you ...
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14 views

What is the difference between the estimand of sharp and fuzzy regression discontinuity design?

I would like to know: 1- the difference between the estimand in sharp and fuzzy regression discontinuity design (RDD). 2- the additional assumptions needed to identify the estimand in fuzzy RDD. ...
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How to interpret B when x is squared?

My OLS regression looks like this: $$y=\beta_0+\beta_1x_1+\beta_2x_2+\beta_3(x_3)^2+\epsilon.$$ I do not include $x_3$ linear because it vifs with squared value and without squared value I have ...
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13 views

Time-invariant covariates & first-difference estimations

The intuition behind first difference estimates (FD) is to remove individual unobserved heterogeneity from the estimation. However, I'm not sure if I should not include time-invariant covariates to ...
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15 views

Is is possible to estimate a mixed logit model with only individual specific parameters?

I am analyzing some data and I do not have any alternative specific variables in the dataset. The question is about the preference between taxi, uber and automated vehicle if all three have the same ...
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1answer
27 views

Why can/should I include “undifferenced ” variables in a first difference estimation?

I am reading this paper and try to use their first-difference approach in a similar setting. They are essentially estimating the following first-difference specification, where Yit is Patenting, Xit ...
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12 views

Hausman test statistic - to multiply or not to multiply by n

I am having some serious doubts regarding the formula of the Hausman statistic for the case in which I compare OLS and IV estimates. I am getting confused with what my references are giving me. What ...
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Granger causality tests when series are measured at different frequencies

As a research exercise I should perform Granger causality tests on pairs of national series (one describing output gap and the other an index of consumers' confidence). However, I face a situation ...
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1answer
32 views

Why does first differencing correct autocorrelation?

If we have an autocorrelated variable in the multiple regression model, why does taking first difference help?
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22 views

Interpretation of the Inverse Mills Ratio

I am running research in which I try to analyze the effect that it has the duration of a study abroad program (such as Erasmus+) on different employment outcomes. Given that participation in a study ...
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22 views

Using regression to solve an expenditure minimization problem

I'm working with some data and I want to choose capital and labour expenditures in order to minimize total expenditures subject to the constraint that they produce a certain level of output. The issue ...
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17 views

Data analysis: Investigating whether a policy is implemented or not

Consider a dataset consisting of student wait times for a large number of experts for two periods. Between the two periods,the school may have altered experts’ capacities based on observations of ...
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1answer
31 views

Controlling for variables in social sciences

I know this is a completely hypothetical scenario but I just want to understand how the effect of a variable could be held constant and how the coefficients of two independent variables are estimated ...
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17 views

Exogenous/control varible not include in IV when runing reg3

I have the following two-equation system. $$y_1=c_{10}+c_{11} y_2+c_{12} x_1+c_{12} x_3+e_1$$ $$y2=c_{20}+c_{21} y_{1}+c_{22} x_2+c_{23} x_3+e_2$$ where, $y_1$, $y_2$ are endogenous variables, $x_1$,$...
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19 views

experimental design to test the effects of price discount

I have a panel dataset with hourly sales:(0:00~23:00) by products, after 16:00, the platform will give a discount to several products if they monitor a high inventory for these products. I want to ...
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1answer
130 views

Decomposing U.S. Imports of Goods by Customs Basis from China

I'm working on a project which aims at analyzing the dataset U.S. Imports of Goods by Customs Basis from China (IMPCH). The main point is to make some prediction but we also want to do a little ...
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1answer
26 views

How to generate a model for the causal effects for a Panel dataset

I have a dataset such as hourly sales data:(0:00~23:00) by products, after 18:00, the platform will give a discount to several products to speed up the sales. If I want to know the causal effects of ...
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1answer
32 views

Regressing a function of independent variables on another function of independent variables

For a particular economic sector, I want to assess whether expenditures on technology, equipment, and construction (which I will call capital expenditures) are cost-increasing or cost-decreasing ...
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18 views

Difference-in-difference analysis: more than one control group

I'm doing a difference-in-difference analysis of the impact of financial incentives on healthcare delivery. I have one treatment group (where there were financial incentives), and two separate ...
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1answer
29 views

Regression model for a difference-in-difference analysis with three time points

I'm doing a difference-in-differences analysis with one pre-treatment time point (0), and two post-treatment time points (1, 2). What would the regression model be?
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1answer
27 views

Use of Weighting Matrix (GMM)

While conducting estimation via the Generalised Method of Moments, or GMM, I understand that we need to minimise the following expression: $Q_n(\theta)=g_n(\theta)'W_ng_n(\theta)$ Where $g_n(\theta)$...
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1answer
35 views

interpreting coefficient on the interaction term

if i have an equation like this $$\log(wage)=\beta_0 + \beta_1*height + \beta_2*weight + \beta_3*(height*weight) + \beta_4*SAT$$ and i am having a problem solving this question. "interpret the ...
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19 views

When to use an interaction with dummy variables, and when to estimate separate regressions? [duplicate]

I am interested in exploring heterogeneous treatment effects by category. As a simple example, imagine that I'm trying to predict the impact of job training on income in New York, and I want to ...
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24 views

Newton Raphson and 2nd Order Taylor

In econometrics, while using Newton Raphson algorithm, why do we use 2nd Order Taylor Expansion, what is the requirement or intiution behind it? Is it something related ti convergence issue? Can ...
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39 views

Unbiasedness of Intrumental Variable Estimator

is instrumental variable estimator unbiased in the case of stochastic regressor X and how can i show this? (I know how to show consistency, i need to show unbiasedness)
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1answer
26 views

How to check for the presence of constant difference within dummy variable?

In econometrics, should two subgroups of the data (for dummy=0 and dummy=1) have some variation, that can be explained also with a constant difference, how would one test for it? And is it a problem (...
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51 views

Dealing with Endogeneity in a Logit Regression when the Endogenous Regressors are Discrete

I would like to estimate a logit model in the presence of endogeneity. The dependent variable is binary (actually, it is non-binary with multiple ordinal categories, but from what I've read dealing ...
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20 views

Should I use a panel/longitudinal data model or a time series model?

Suppose I want to assess the impact of school attendance rates on test scores in a particular Canadian province, Alberta. I have data on both variables for Alberta, but also for the other Canadian ...
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1answer
42 views

Instrumental variable

I am exploring the impact of social media WOM on firm performance during the 8 quarters of 2014-2015 for several firms. As WOM is likely endogenous, I was thinking of using weather data as instrument. ...
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Lagged dependent variables, bias and consistency

I am working through Christopher Dougherty's Introduction to Econometrics, and am struggling to fully grasp the consequences of lagged dependent variables in terms of bias and consistency. The key ...
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23 views

On an alternative filter for a particular class of state space models

Let $ \{ X_t \}_{t \in \mathbb{Z} }$ be a real valued time series that can be represented in a state space form, in particular assume that the sequence $ \{ X_t \}_{t \in \mathbb{Z} }$ satisfies an ...
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17 views

How to prove that X'ε=0 in regression models? [duplicate]

If X is a nxn matrix of some data exogenous to and ε is a 1xn matrix of residuals that sum up to zero, why is X'ε=0? EDIT: It's clear to me why ε sum to zero, but I see no reason why this should ...
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12 views

In quantile regression how do you use the equivariance property with many variables $Q_{h(x,\epsilon)|x}(u|x)$?

I have seen in a text book that if we assume monotonicity and independence then if $Q_{y|x}(u|x)$ is the conditional quantile function. and $Y=h(x,\epsilon)$ then $Q_{y|x}(u|x)= h(x,Q_{\epsilon|...