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Econometrics
Volume 7
Issue 1
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Econometrics, Volume 7, Issue 1 (March 2019) – 16 articles

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15 pages, 361 KiB  
Article
Monte Carlo Inference on Two-Sided Matching Models
by Taehoon Kim, Jacob Schwartz, Kyungchul Song and Yoon-Jae Whang
Econometrics 2019, 7(1), 16; https://doi.org/10.3390/econometrics7010016 - 26 Mar 2019
Cited by 4 | Viewed by 7117
Abstract
This paper considers two-sided matching models with nontransferable utilities, with one side having homogeneous preferences over the other side. When one observes only one or several large matchings, despite the large number of agents involved, asymptotic inference is difficult because the observed matching [...] Read more.
This paper considers two-sided matching models with nontransferable utilities, with one side having homogeneous preferences over the other side. When one observes only one or several large matchings, despite the large number of agents involved, asymptotic inference is difficult because the observed matching involves the preferences of all the agents on both sides in a complex way, and creates a complicated form of cross-sectional dependence across observed matches. When we assume that the observed matching is a consequence of a stable matching mechanism with homogeneous preferences on one side, and the preferences are drawn from a parametric distribution conditional on observables, the large observed matching follows a parametric distribution. This paper shows in such a situation how the method of Monte Carlo inference can be a viable option. Being a finite sample inference method, it does not require independence or local dependence among the observations which are often used to obtain asymptotic validity. Results from a Monte Carlo simulation study are presented and discussed. Full article
(This article belongs to the Special Issue Resampling Methods in Econometrics)
14 pages, 283 KiB  
Article
On the Convergence Rate of the SCAD-Penalized Empirical Likelihood Estimator
by Tomohiro Ando and Naoya Sueishi
Econometrics 2019, 7(1), 15; https://doi.org/10.3390/econometrics7010015 - 20 Mar 2019
Cited by 2 | Viewed by 6271
Abstract
This paper investigates the asymptotic properties of a penalized empirical likelihood estimator for moment restriction models when the number of parameters ( p n ) and/or the number of moment restrictions increases with the sample size. Our main result is that the SCAD-penalized [...] Read more.
This paper investigates the asymptotic properties of a penalized empirical likelihood estimator for moment restriction models when the number of parameters ( p n ) and/or the number of moment restrictions increases with the sample size. Our main result is that the SCAD-penalized empirical likelihood estimator is n / p n -consistent under a reasonable condition on the regularization parameter. Our consistency rate is better than the existing ones. This paper also provides sufficient conditions under which n / p n -consistency and an oracle property are satisfied simultaneously. As far as we know, this paper is the first to specify sufficient conditions for both n / p n -consistency and the oracle property of the penalized empirical likelihood estimator. Full article
17 pages, 308 KiB  
Article
Indirect Inference: Which Moments to Match?
by David T. Frazier and Eric Renault
Econometrics 2019, 7(1), 14; https://doi.org/10.3390/econometrics7010014 - 19 Mar 2019
Cited by 1 | Viewed by 7162
Abstract
The standard approach to indirect inference estimation considers that the auxiliary parameters, which carry the identifying information about the structural parameters of interest, are obtained from some recently identified vector of estimating equations. In contrast to this standard interpretation, we demonstrate that the [...] Read more.
The standard approach to indirect inference estimation considers that the auxiliary parameters, which carry the identifying information about the structural parameters of interest, are obtained from some recently identified vector of estimating equations. In contrast to this standard interpretation, we demonstrate that the case of overidentified auxiliary parameters is both possible, and, indeed, more commonly encountered than one may initially realize. We then revisit the “moment matching” and “parameter matching” versions of indirect inference in this context and devise efficient estimation strategies in this more general framework. Perhaps surprisingly, we demonstrate that if one were to consider the naive choice of an efficient Generalized Method of Moments (GMM)-based estimator for the auxiliary parameters, the resulting indirect inference estimators would be inefficient. In this general context, we demonstrate that efficient indirect inference estimation actually requires a two-step estimation procedure, whereby the goal of the first step is to obtain an efficient version of the auxiliary model. These two-step estimators are presented both within the context of moment matching and parameter matching. Full article
(This article belongs to the Special Issue Resampling Methods in Econometrics)
32 pages, 417 KiB  
Article
Fixed and Long Time Span Jump Tests: New Monte Carlo and Empirical Evidence
by Mingmian Cheng and Norman R. Swanson
Econometrics 2019, 7(1), 13; https://doi.org/10.3390/econometrics7010013 - 13 Mar 2019
Cited by 1 | Viewed by 6338
Abstract
Numerous tests designed to detect realized jumps over a fixed time span have been proposed and extensively studied in the financial econometrics literature. These tests differ from “long time span tests” that detect jumps by examining the magnitude of the jump intensity parameter [...] Read more.
Numerous tests designed to detect realized jumps over a fixed time span have been proposed and extensively studied in the financial econometrics literature. These tests differ from “long time span tests” that detect jumps by examining the magnitude of the jump intensity parameter in the data generating process, and which are consistent. In this paper, long span jump tests are compared and contrasted with a variety of fixed span jump tests in a series of Monte Carlo experiments. It is found that both the long time span tests of Corradi et al. (2018) and the fixed span tests of Aït-Sahalia and Jacod (2009) exhibit reasonably good finite sample properties, for time spans both short and long. Various other tests suffer from finite sample distortions, both under sequential testing and under long time spans. The latter finding is new, and confirms the “pitfall” discussed in Huang and Tauchen (2005), of using asymptotic approximations associated with finite time span tests in order to study long time spans of data. An empirical analysis is carried out to investigate the implications of these findings, and “time-span robust” tests indicate that the prevalence of jumps is not as universal as might be expected. Full article
(This article belongs to the Special Issue Resampling Methods in Econometrics)
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13 pages, 312 KiB  
Article
On the Validity of Tests for Asymmetry in Residual-Based Threshold Cointegration Models
by Karl-Heinz Schild and Karsten Schweikert
Econometrics 2019, 7(1), 12; https://doi.org/10.3390/econometrics7010012 - 13 Mar 2019
Cited by 3 | Viewed by 6242
Abstract
This paper investigates the properties of tests for asymmetric long-run adjustment which are often applied in empirical studies on asymmetric price transmissions. We show that substantial size distortions are caused by preconditioning the test on finding sufficient evidence for cointegration in a first [...] Read more.
This paper investigates the properties of tests for asymmetric long-run adjustment which are often applied in empirical studies on asymmetric price transmissions. We show that substantial size distortions are caused by preconditioning the test on finding sufficient evidence for cointegration in a first step. The extent of oversizing the test for long-run asymmetry depends inversely on the power of the primary cointegration test. Hence, tests for long-run asymmetry become invalid in cases of small sample sizes or slow speed of adjustment. Further, we provide simulation evidence that tests for long-run asymmetry are generally oversized if the threshold parameter is estimated by conditional least squares and show that bootstrap techniques can be used to obtain the correct size. Full article
(This article belongs to the Special Issue Resampling Methods in Econometrics)
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5 pages, 364 KiB  
Article
Not p-Values, Said a Little Bit Differently
by Richard Startz
Econometrics 2019, 7(1), 11; https://doi.org/10.3390/econometrics7010011 - 13 Mar 2019
Cited by 1 | Viewed by 7511
Abstract
As a contribution toward the ongoing discussion about the use and mis-use of p-values, numerical examples are presented demonstrating that a p-value can, as a practical matter, give you a really different answer than the one that you want. Full article
(This article belongs to the Special Issue Towards a New Paradigm for Statistical Evidence)
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16 pages, 1467 KiB  
Concept Paper
Permutation Entropy and Information Recovery in Nonlinear Dynamic Economic Time Series
by Miguel Henry and George Judge
Econometrics 2019, 7(1), 10; https://doi.org/10.3390/econometrics7010010 - 12 Mar 2019
Cited by 48 | Viewed by 9918
Abstract
The focus of this paper is an information theoretic-symbolic logic approach to extract information from complex economic systems and unlock its dynamic content. Permutation Entropy (PE) is used to capture the permutation patterns-ordinal relations among the individual values of a given time series; [...] Read more.
The focus of this paper is an information theoretic-symbolic logic approach to extract information from complex economic systems and unlock its dynamic content. Permutation Entropy (PE) is used to capture the permutation patterns-ordinal relations among the individual values of a given time series; to obtain a probability distribution of the accessible patterns; and to quantify the degree of complexity of an economic behavior system. Ordinal patterns are used to describe the intrinsic patterns, which are hidden in the dynamics of the economic system. Empirical applications involving the Dow Jones Industrial Average are presented to indicate the information recovery value and the applicability of the PE method. The results demonstrate the ability of the PE method to detect the extent of complexity (irregularity) and to discriminate and classify admissible and forbidden states. Full article
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22 pages, 547 KiB  
Article
A Parametric Factor Model of the Term Structure of Mortality
by Niels Haldrup and Carsten P. T. Rosenskjold
Econometrics 2019, 7(1), 9; https://doi.org/10.3390/econometrics7010009 - 11 Mar 2019
Cited by 6 | Viewed by 7454
Abstract
The prototypical Lee–Carter mortality model is characterized by a single common time factor that loads differently across age groups. In this paper, we propose a parametric factor model for the term structure of mortality where multiple factors are designed to influence the age [...] Read more.
The prototypical Lee–Carter mortality model is characterized by a single common time factor that loads differently across age groups. In this paper, we propose a parametric factor model for the term structure of mortality where multiple factors are designed to influence the age groups differently via parametric loading functions. We identify four different factors: a factor common for all age groups, factors for infant and adult mortality, and a factor for the “accident hump” that primarily affects mortality of relatively young adults and late teenagers. Since the factors are identified via restrictions on the loading functions, the factors are not designed to be orthogonal but can be dependent and can possibly cointegrate when the factors have unit roots. We suggest two estimation procedures similar to the estimation of the dynamic Nelson–Siegel term structure model. First, a two-step nonlinear least squares procedure based on cross-section regressions together with a separate model to estimate the dynamics of the factors. Second, we suggest a fully specified model estimated by maximum likelihood via the Kalman filter recursions after the model is put on state space form. We demonstrate the methodology for US and French mortality data. We find that the model provides a good fit of the relevant factors and, in a forecast comparison with a range of benchmark models, it is found that, especially for longer horizons, variants of the parametric factor model have excellent forecast performance. Full article
(This article belongs to the Special Issue Celebrated Econometricians: Katarina Juselius and Søren Johansen)
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24 pages, 3892 KiB  
Article
Structural Panel Bayesian VAR Model to Deal with Model Misspecification and Unobserved Heterogeneity Problems
by Antonio Pacifico
Econometrics 2019, 7(1), 8; https://doi.org/10.3390/econometrics7010008 - 11 Mar 2019
Cited by 9 | Viewed by 7711
Abstract
This paper provides an overview of a time-varying Structural Panel Bayesian Vector Autoregression model that deals with model misspecification and unobserved heterogeneity problems in applied macroeconomic analyses when studying time-varying relationships and dynamic interdependencies among countries and variables. I discuss what its distinctive [...] Read more.
This paper provides an overview of a time-varying Structural Panel Bayesian Vector Autoregression model that deals with model misspecification and unobserved heterogeneity problems in applied macroeconomic analyses when studying time-varying relationships and dynamic interdependencies among countries and variables. I discuss what its distinctive features are, what it is used for, and how it can be analytically derived. I also describe how it is estimated and how structural spillovers and shock identification are performed. The model is empirically applied to a set of developed European economies to illustrate the functioning and the ability of the model. The paper also discusses more recent studies that have used multivariate dynamic macro-panels to evaluate idiosyncratic business cycles, policy-making, and spillover effects among different sectors and countries. Full article
(This article belongs to the Special Issue Big Data in Economics and Finance)
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18 pages, 777 KiB  
Article
Panel Data Estimation for Correlated Random Coefficients Models
by Cheng Hsiao, Qi Li, Zhongwen Liang and Wei Xie
Econometrics 2019, 7(1), 7; https://doi.org/10.3390/econometrics7010007 - 1 Feb 2019
Cited by 3 | Viewed by 8453
Abstract
This paper considers methods of estimating a static correlated random coefficient model with panel data. We mainly focus on comparing two approaches of estimating unconditional mean of the coefficients for the correlated random coefficients models, the group mean estimator and the generalized least [...] Read more.
This paper considers methods of estimating a static correlated random coefficient model with panel data. We mainly focus on comparing two approaches of estimating unconditional mean of the coefficients for the correlated random coefficients models, the group mean estimator and the generalized least squares estimator. For the group mean estimator, we show that it achieves Chamberlain (1992) semi-parametric efficiency bound asymptotically. For the generalized least squares estimator, we show that when T is large, a generalized least squares estimator that ignores the correlation between the individual coefficients and regressors is asymptotically equivalent to the group mean estimator. In addition, we give conditions where the standard within estimator of the mean of the coefficients is consistent. Moreover, with additional assumptions on the known correlation pattern, we derive the asymptotic properties of panel least squares estimators. Simulations are used to examine the finite sample performances of different estimators. Full article
(This article belongs to the Special Issue Celebrated Econometricians: Peter Phillips)
24 pages, 391 KiB  
Article
Asymptotic Theory for Cointegration Analysis When the Cointegration Rank Is Deficient
by David H. Bernstein and Bent Nielsen
Econometrics 2019, 7(1), 6; https://doi.org/10.3390/econometrics7010006 - 18 Jan 2019
Cited by 5 | Viewed by 9526
Abstract
We consider cointegration tests in the situation where the cointegration rank is deficient. This situation is of interest in finite sample analysis and in relation to recent work on identification robust cointegration inference. We derive asymptotic theory for tests for cointegration rank and [...] Read more.
We consider cointegration tests in the situation where the cointegration rank is deficient. This situation is of interest in finite sample analysis and in relation to recent work on identification robust cointegration inference. We derive asymptotic theory for tests for cointegration rank and for hypotheses on the cointegrating vectors. The limiting distributions are tabulated. An application to US treasury yields series is given. Full article
(This article belongs to the Special Issue Celebrated Econometricians: Katarina Juselius and Søren Johansen)
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20 pages, 1521 KiB  
Article
Information Flow in Times of Crisis: The Case of the European Banking and Sovereign Sectors
by Mardi Dungey, Stan Hurn, Shuping Shi and Vladimir Volkov
Econometrics 2019, 7(1), 5; https://doi.org/10.3390/econometrics7010005 - 17 Jan 2019
Cited by 4 | Viewed by 7830
Abstract
Crises in the banking and sovereign debt sectors give rise to heightened financial fragility. Of particular concern is the development of self-fulfilling feedback loops where crisis conditions in one sector are transmitted to the other sector and back again. We use time-varying tests [...] Read more.
Crises in the banking and sovereign debt sectors give rise to heightened financial fragility. Of particular concern is the development of self-fulfilling feedback loops where crisis conditions in one sector are transmitted to the other sector and back again. We use time-varying tests of Granger causality to demonstrate how empirical evidence of connectivity between the banking and sovereign sectors can be detected, and provide an application to the Greek, Irish, Italian, Portuguese and Spanish (GIIPS) countries and Germany over the period 2007 to 2016. While the results provide evidence of domestic feedback loops, the most important finding is that financial fragility is an international problem and cannot be dealt with purely on a country-by-country basis. Full article
(This article belongs to the Special Issue Celebrated Econometricians: Peter Phillips)
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16 pages, 331 KiB  
Article
Gini Regressions and Heteroskedasticity
by Arthur Charpentier, Ndéné Ka, Stéphane Mussard and Oumar Hamady Ndiaye
Econometrics 2019, 7(1), 4; https://doi.org/10.3390/econometrics7010004 - 14 Jan 2019
Cited by 7 | Viewed by 7787
Abstract
We propose an Aitken estimator for Gini regression. The suggested A-Gini estimator is proven to be a U-statistics. Monte Carlo simulations are provided to deal with heteroskedasticity and to make some comparisons between the generalized least squares and the Gini regression. [...] Read more.
We propose an Aitken estimator for Gini regression. The suggested A-Gini estimator is proven to be a U-statistics. Monte Carlo simulations are provided to deal with heteroskedasticity and to make some comparisons between the generalized least squares and the Gini regression. A Gini-White test is proposed and shows that a better power is obtained compared with the usual White test when outlying observations contaminate the data. Full article
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2 pages, 132 KiB  
Editorial
Acknowledgement to Reviewers of Econometrics in 2018
by Econometrics Editorial Office
Econometrics 2019, 7(1), 3; https://doi.org/10.3390/econometrics7010003 - 10 Jan 2019
Viewed by 5390
Abstract
Rigorous peer-review is the corner-stone of high-quality academic publishing [...] Full article
10 pages, 254 KiB  
Article
Cointegration and Adjustment in the CVAR(∞) Representation of Some Partially Observed CVAR(1) Models
by Søren Johansen
Econometrics 2019, 7(1), 2; https://doi.org/10.3390/econometrics7010002 - 10 Jan 2019
Cited by 5 | Viewed by 6634
Abstract
A multivariate CVAR(1) model for some observed variables and some unobserved variables is analysed using its infinite order CVAR representation of the observations. Cointegration and adjustment coefficients in the infinite order CVAR are found as functions of the parameters in the CVAR(1) model. [...] Read more.
A multivariate CVAR(1) model for some observed variables and some unobserved variables is analysed using its infinite order CVAR representation of the observations. Cointegration and adjustment coefficients in the infinite order CVAR are found as functions of the parameters in the CVAR(1) model. Conditions for weak exogeneity for the cointegrating vectors in the approximating finite order CVAR are derived. The results are illustrated by two simple examples of relevance for modelling causal graphs. Full article
(This article belongs to the Special Issue Celebrated Econometricians: Katarina Juselius and Søren Johansen)
16 pages, 291 KiB  
Article
The Specification of Dynamic Discrete-Time Two-State Panel Data Models
by Tue Gørgens and Dean Robert Hyslop
Econometrics 2019, 7(1), 1; https://doi.org/10.3390/econometrics7010001 - 24 Dec 2018
Cited by 1 | Viewed by 6221
Abstract
This paper compares two approaches to analyzing longitudinal discrete-time binary outcomes. Dynamic binary response models focus on state occupancy and typically specify low-order Markovian state dependence. Multi-spell duration models focus on transitions between states and typically allow for state-specific duration dependence. We show [...] Read more.
This paper compares two approaches to analyzing longitudinal discrete-time binary outcomes. Dynamic binary response models focus on state occupancy and typically specify low-order Markovian state dependence. Multi-spell duration models focus on transitions between states and typically allow for state-specific duration dependence. We show that the former implicitly impose strong and testable restrictions on the transition probabilities. In a case study of poverty transitions, we show that these restrictions are severely rejected against the more flexible multi-spell duration models. Full article
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