# Tag Info

Accepted

### Long-run elasticities in an ECM estimation

Remember that OLS is linear on parameters. This is, regression estimates the parameters of each regressor in the following equation:  \Delta ln I = \beta_{1}\Delta lnY + \beta_{2}\Delta lnY(-1) + \...
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### Interpretation of the Impulse Response Function - VAR Estimation

I would strongly encourage you to read a an introduction in VAR estimation, e.g. Lütkepohl. The visual impulse response analysis is quite simple: The columns always indicate the reaction to one shock. ...
• 542

### Regression results contradict economic theory (GDP analysis)

Endogeneity The macroeconomic variables you are studying are likely to affect each other. In particular, the variables on the right hand side of your model might be affected by the variable on the ...
• 68.1k

### Minimal sample size for Granger causality testing with quarterly macroeconomic data

The question is actually more generic than just VAR models and Granger causality. In statistical modelling, you need a minimum sample size to be technically able to estimate model parameters. Once ...
• 68.1k

### How to design an economic index?

There are a number of papers that provide significant detail on the methodology behind various economic indices. Examples/Case Studies Constructing socio-economic status indices: how to use ...
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### Forecasting GDP using regression, ARIMA and ETS

Some general comments. You may think about omitted variable bias. If there are other variables influencing/determining the GDP growth, and those variables are correlated with the change in the ...
• 68.1k

### Can you regress a variable on first differences on a variable on second differences?

No, you can't. If you have just two variables, and they have different integration orders, they will not be cointegrated, and thus your regression is spurious. For example, say your population model ...
• 2,750
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### Overview Standard Error Correction in Time Series / Panel Literature

Baltagi, B. H. (2006). Panel Data Econometrics Theoretical Contributions and Empirical Applications. Emerald Group Publishing Limited. See https://scholar.harvard.edu/files/stock/files/...
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### Anything wrong with taking the log of an interest rate?

Let’s say that a very low interest rate is of the order of 0.1% and a high interest rate of the order of 10%, so there is a likely range of say two orders of magnitude. Then logarithmic thinking ...
• 57.7k

In my mind, these issues are not particularly wedded to unit roots. What Hamilton (and the papers cited there) seems to be saying is that parameters very close to each other are very hard to ...
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### When is a statistical test said to be robust? Also, is normal distribution applicable to economic variables as well?

When is a statistical test said to be robust? That depends on who is saying it! There are two main things with hypothesis tests -- how they perform under the null and how they perform under the ...
• 284k

### Using a VAR over a VECM (in spite of of existing cointegration)

There is at least one reason -- the bias-variance trade-off. You might prefer a wrong model as long as it gives you better forecasts. Suppose VECM is the true model. Then VAR in first differences is ...
• 68.1k

### Rate of Unemployment better logarithm or not

This is very much dependent on your context and the purpose for which you might want to apply the logarithmic transformation. You did not provide enough detail to go really in depth with my answer. ...

### Interest rate control variable GARCH

Research in linking financial market volatility and macroeconomic fundamentals has been a widely studied topic. Different interest rates and related variables have been included in papers from the ...
• 1,145
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### Correlation between monthly and quarterly data

Go back to basics and ask, "What is a correlation?" The right answer is that there are many measures of "correlation" when broadly considered as pairwise metrics for demonstrating association between ...
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### Johansen-Procedure Interpretation (ca.jo)

I think we need to look at cointegration first. There is a good article for that and the subject you ask. Johansen Test For Cointegrating Time Series
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### Time Series Multivariate Forecasting

Feature Selection Feature selection aka model selection is difficult. By that I mean it is an unsolved problem and there is evidence that it is an NP-hard problem. The title of Maymin (2011) hints at ...
• 1,648

### Working with systems with Perfect Multicollinearity

Your problem comes from this: All predictors and the dependent variable sum to 0. That necessarily imposes a linear dependence, hence the near-perfect collinearity. If you "can't eliminate even ...
• 93.8k
1 vote

### How important is a statistically significant intercept?

The intent of your question is not entirely clear. But, if you ask if you could/should reestimate the model without the intercept, if it is not significant, then have a look at When is it ok to remove ...
• 79.9k
1 vote
Accepted

### Supply and Demand Graphs in R

I don't think there exists a package for just economical data visualizations. What kind of functionality do you need that the basic R graphics cannot offer you? The more you want to customize your ...
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1 vote

### Unit Root - Real Interest Rate

Finding cointegration between (I'm assuming everything in natural logs) $r =$ (nominal interest rate) and $\pi =$ (inflation rate) -- make sure you know whether you want ex ante or ex post real rates ...
• 302
1 vote
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### Long-term targets of variables in levels for differenced VAR

If your time series is nonstationary in the sense that it has a unit root, it will not tend to any fixed value over time. Hence, trying to find such a value would not make sense. You either have to ...
• 68.1k
1 vote

### Macroeconomic variables in GARCH

Yes, it is possible to add exogenous variables directly to the "GARCH" equation in both GARCH, GJR-GARCH, EGARCH, and other volatility models. However, the asymptotic theory is not established yet in ...
• 1,145
1 vote
Accepted

### How to estimate all percentile values (or distribution) from only decile values?

Try the R package rriskDistributions which includes a function 'fit.perc' which "provides a GUI for choosing a most appropriate continuous distribution for known quantiles." All you need to do is ...
• 126
1 vote

### Interpreting diagnostics and tests with time series data

Not sure if the answer is still useful for you after all these months have passed, but here goes: @1: In your first regression there is evidence of negative first-order autocorrelation, as indicated ...
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1 vote
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### How to interpret an equation with both growth rates and logged variables?

A rise of 1% in median house prices will, on average, lead to a $-0.97/100 = -0.0097$ increase (or a $0.0097$ decrease: $0.97$ percentage points) in the 5-year rate of growth in house prices.
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1 vote
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### Avoiding multicollinearity in a multi group diff-in-diff model

Since each case belongs to exactly one of group A, B, or C, if the case doesn't belong to either A or B then it must belong to group C. So there are only 2 independent predictors among the three of A, ...
• 93.8k
1 vote
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### Estimating regional level data from national data

Here is one way of doing this, probably as straightforward as possible. This could form a base case for comparing to more sophisticated methods. To have the regional unemployment rates consistent ...
• 17.8k
1 vote

### Unit root test Unemployment

I am not familiar with the Austrian economy so I cannot assess the claim about the unemployment rate being close to the natural level; I understand that, should that be the case, that claim would be ...
1 vote
Accepted

### How to create a variable measuring terrorism?

A common approach to dimensionality reduction is to perform Principal Components Analysis (PCA). Let's say you have some vector $\mathbf{x}$. Instead of a basis \$\mathbf{u}_1 = \begin{bmatrix} 1 \\ 0 ...
• 22.5k

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