ChatterBank1 min ago
Which Econometric Model Should I Use?
6 Answers
I want to build a model and I currently have the equation:
Y = x1 + x2 + x3 + u1
I then have explanatory variables for each of the variables on the right
So:
x1= p1+p2+p3+u2
x2= s1+s2+s3+s2
x3= a1+a2+a3+u2
Which model will allow me to ensure that all of these variables are considered when I am creating the model? I thought about using a simultaneous equation model but my initial independent variable Y does not occur in the later equations so I do not think I can or I do not know how to use this model
Any tips or advice is greatly appreciated!
Y = x1 + x2 + x3 + u1
I then have explanatory variables for each of the variables on the right
So:
x1= p1+p2+p3+u2
x2= s1+s2+s3+s2
x3= a1+a2+a3+u2
Which model will allow me to ensure that all of these variables are considered when I am creating the model? I thought about using a simultaneous equation model but my initial independent variable Y does not occur in the later equations so I do not think I can or I do not know how to use this model
Any tips or advice is greatly appreciated!
Answers
Best Answer
No best answer has yet been selected by aaronhonour. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.Hello, yes thankyou i did make a few errors in the initial post
I did mean the dependent variable Y
The s2 should have been u2 to represent the error term
and the error term of x3 should be u3
really sorry about those mistakes...
So should I use a linear model? are there any alternatives?
My equations in a less abstract way would be as follows
∆Y =α+b1Y+b2CIVIL+b3 POLIT+b4 CORUP+ϵ1
CIVIL= δ1 SPEECH+δ2BELIEF+δ3 PRESS+δ4PERAT+ϵ2
POLIT=γ1 VOTE+γ2PUBO+γ2 ACCOUNT+ϵ3
Where ∆Y_it = Change in GDP per Capita, Y= GDP per Capita CIV=Civil Liberties, POL= Political Rights, COR= Corruption, SPH = Freedom of speech, BEL = Freedom of belief, PRS = Freedom of Media, PAT = Personal Autonomy, VTE = Freedom to vote, PBO = Ability to obtain public office, ACC = Accountability of those in power to electorate.
I am not sure if this even makes any difference. Mainly I am unsure what my options would be?
Thanks again for any help
I did mean the dependent variable Y
The s2 should have been u2 to represent the error term
and the error term of x3 should be u3
really sorry about those mistakes...
So should I use a linear model? are there any alternatives?
My equations in a less abstract way would be as follows
∆Y =α+b1Y+b2CIVIL+b3 POLIT+b4 CORUP+ϵ1
CIVIL= δ1 SPEECH+δ2BELIEF+δ3 PRESS+δ4PERAT+ϵ2
POLIT=γ1 VOTE+γ2PUBO+γ2 ACCOUNT+ϵ3
Where ∆Y_it = Change in GDP per Capita, Y= GDP per Capita CIV=Civil Liberties, POL= Political Rights, COR= Corruption, SPH = Freedom of speech, BEL = Freedom of belief, PRS = Freedom of Media, PAT = Personal Autonomy, VTE = Freedom to vote, PBO = Ability to obtain public office, ACC = Accountability of those in power to electorate.
I am not sure if this even makes any difference. Mainly I am unsure what my options would be?
Thanks again for any help
I spent around ten years of my working life running doing multiple regression analysis models with just three or sometimes four independent variables. I saw the results of the early forecasts I produced.
You asked for advice: mine is don't bother! Multiple regression analysis simply replaces the problem of forecasting one variable with the far greater problem of forecasting many more. My advice seems particulary appropriate when looking at some of what you call "less abstract" independent variables :-)
You asked for advice: mine is don't bother! Multiple regression analysis simply replaces the problem of forecasting one variable with the far greater problem of forecasting many more. My advice seems particulary appropriate when looking at some of what you call "less abstract" independent variables :-)
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