econometrics

IntroductionIn the era of artificial intelligence (AI), computing power infrastructure (CPI) has become a foundational pillar of the digital economy. At the same time, the security and resilience of mineral resource supply chains particularly for critical minerals such as gallium, germanium and rare earth elements face unprecedented challenges from geopolitical tensions and surging demand. Prior …

Consider the simplest textbook instrumental variables (IV) model with one endogenous regressor and a single valid instrument . You are given the estimated slope coefficient from the reduced form regression of on along with its standard error . You are also given the estimated slope coefficient from the first stage regression of on . The IV estimate equals . Does its standard error equal ? 1 Solut…

Today’s challenge is to do a power calculation in your head . No paper, no pencils, no normal tables, and no statistical software packages are allowed! Suppose you observe independent draws from each of two normally distributed populations. For simplicity, assume that both populations have a common variance , assumed known. You plan to carry out a test of the null hypothesis that the population m…

This article develops a new test to detect changes in generalized autoregressive conditionally heteroscedastic (GARCH(1,1)) processes without imposing a stationary assumption. Specifically, the procedure tests the null hypothesis of a GARCH process with constant parameters, either in (strictly) stationary or explosive regimes, against the alternative hypothesis of parameter changes. We derive the…

The simplest most important idea for time series forecasting The post Measuring Structure Stability of Econometric Models appeared first on Towards Data Science .

This article studies estimation and inference in the autoregressive (AR) models with unspecified and heavy-tailed heteroskedastic noises. A piece-wise locally stationary structure of the noise is constructed to capture various forms of heterogeneity, without imposing any restrictions on the tail index. The new nonstationary AR model allows for not only time-varying conditional features but also u…

The Classical Linear Regression Model (CLRM) is the foundation of econometrics. It ensures that Ordinary Least Squares (OLS) estimators are BLUE — Best Linear Unbiased Estimators. For this to hold true, certain assumptions must be satisfied. Let’s explore them step by step. 1. Linearity in Parameters 2. Zero Mean of Error Term 3. No Correlation […]

The Missing Intercept: A Demand Equivalence Approach Wolf, Christian K I give conditions under which changes in private spending are accommodated in general equilibrium exactly like changes in aggregate fiscal expenditure. Under such demand equivalence, researchers can use time series evidence on fiscal multipliers to recover the general equilibrium “missing intercept” of shocks to private spendi…

This paper considers linear rational expectations models in the frequency domain. The paper characterizes existence and uniqueness of solutions to particular as well as generic systems. The set of all solutions to a given system is shown to be a finite-dimensional affine space in the frequency domain. It is demonstrated that solutions can be discontinuous with respect to the parameters of the mod…

Today econometrics.blog got a long-overdue update from blogdown to Quarto . Thanks to Claude Code , the transition was seamless: all existing links are preserved, along with the Utterances comment sections. During the upgrade I also corrected an embarrassingly large number of typos across the site and added privacy-respecting site analytics using GoatCounter . To find out whether econometrics has…

Mildly explosive autoregressions have been extensively employed in recent theoretical and applied econometric work to model the phenomenon of asset market bubbles. An important issue in this context concerns the construction of confidence intervals for the autoregressive parameter that represents the degree of explosiveness. Existing studies rely on intervals that are justified only under conditi…

Francesco Bianchi, Marco Del Negro, Giorgio Primiceri and Frank Schorfheide pay tribute to Prof Christopher Sims: Chris Sims, who passed away in March 2026, reshaped modern macroeconomics by insisting that theory and data speak together. A pioneer of vector autoregressions, Bayesian methods, and policy relevant modelling, he transformed how scholars and practitioners analyse economic dynamics and…