Latest Econometrics Papers

SPECIFICATION FOR LATTICE PROCESSES

Javier Hidalgo, Myung Hwan Seo

EM/2013/562. May 2013.
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We consider an omnibus test for the correct speci…cation of the dynamics of a sequence fx (t)gt2Zd in a lattice. As it happens with causal models and d = 1, its asymptotic distribution is not pivotal and depends on the estimator of the unknown parameters of the model under the null hypothesis. One of our main goals of the paper is to provide a transformation to obtain an asymptotic distribution that is free of nuisance parameters. Secondly, we propose a bootstrap analogue of the transformation and show its validity. Third, we discuss the results when fx (t)gt2Zd are the errors of a parametric regression model. As a by product, we also discuss the asymptotic normality of the least squares estimators under very mild conditions. Finally, we present a small Monte Carlo experiment to shed some light on the …nite sample behaviour of our test.

Full article: http://sticerd.lse.ac.uk/dps/em/em562.pdf

Testing for Structural Stability in the Whole Sample

Javier Hidalgo, Myung Hwan Seo

EM/2013/561. September 2012.
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The paper examines a Lagrange Multiplier type test for the constancy of the parameter in general models with dependent data without imposing any arti…cial choice of the possible location of the break. In order to prove the asymptotic behaviour of the test, we extend a strong approximation result for partial sums of a sequence of random variables. We also present a Monte-Carlo experiment to examine the …nite sample performance of the test and how it compares with tests which assume some knowledge of the possible location of the break.

Full article: http://sticerd.lse.ac.uk/dps/em/em561.pdf

ON TESTABILITY OF COMPLEMENTARITY IN MODELS WITH MULTIPLE EQUILIBRIA

Taisuke Otsu, Yoshiyasu Rai

EM/2013/560. February 2013.
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This paper revisits testability of complementarity in economic models with multiple equilibria studied by Echenique and Komunjer (2009). We find that Echenique and Komunjer’s (2009) testable implications on extreme quantiles can be implied by a weaker version of their tail condition without complementarity, and on the other hand, a slightly stronger version of complementarity implies their testable implications without the tail condition.

Full article: http://sticerd.lse.ac.uk/dps/seminarpapers/em05022013.pdf

Binary Choice Models with Discrete Regressors: Identification and Misspecification

Tatiana Komarova

EM/2012/559. May 2012.
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In semiparametric binary response models, support conditions on the regressors are required to guarantee point identification of the parameter of interest. For example,one regressor is usually assumed to have continuous support conditional on the other regressors. In some instances, such conditions have precluded the use of these models; in others, practitioners have failed to consider whether the conditions are satisfied in their data. This paper explores the inferential question in these semiparametric models when the continuous support condition is not satisfied and all regressors have discrete support. I suggest a recursive procedure that finds sharp bounds on the components of the parameter of interest and outline several applications, focusing mainly on the models under the conditional median restriction, as in Manski (1985). After deriving closed-form bounds on the components of the parameter, I show how these formulas can help analyze cases where one regressor’s support becomes increasingly dense. Furthermore, I investigate asymptotic properties of estimators of the identification set. I describe a relation between the maximum score estimation and support vector machines and also propose several approaches to address the problem of empty identification sets when a model is misspecified. Finally, I present a Monte Carlo experiment and an empirical illustration to compare several estimation techniques.

Full article: http://sticerd.lse.ac.uk/dps/seminarpapers/em24052012.pdf