Robust Modeling of Policy Changes: Difference in Difference (DiD)

The difference in Difference (DiD) is a popular method in empirical economics and has important applications in other social sciences as well. DID is a quasi-experimental design that uses panel data to estimate the effects of specific intervention or treatment (such as policy changes, new laws, social program implementation) on outcomes over time and between …

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Taking Logarithms of Growth Rates and Log-based Data.

A usual practice while we’re handling economic data, is the use of logarithms, the main idea behind using them is to reduce the Heteroscedasticity -HT- of the data (Nau, 2019). Thus reducing HT, implies reducing the variance of the data. Several times, different authors implement some kind of double logarithm transformation, which is defined as …

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The Development Impact of Foreign Aid: Story Re-told

There has been an intense debate in the literature over the reasons behind the loose developmental effects of foreign aid. Away from the straightforward reason that majority of aid flows follow political rather than development objectives (Kanbur et al., 1999; Dreher, et al. 2009). Further, several reasons have been introduced in the literature see for …

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Can cointegration analysis solve spurious regression problem?

The efforts to avoid the existence of spurious regression has led to the development of modern time series analysis (see How Modern Time Series Analysis Emerged? ). The core objective of unit root and cointegration procedures is to differentiate between genuine and spurious regression. However, despite the huge literature, the unit root and cointegration analysis …

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The impact of functional form over the normality assumption in the residuals

A discussed solution in order to accomplish the normality assumption in regression models relates to the correct specification of a Data Generating Process (Rodríguez Revilla, 2014), the objective here is to demonstrate how functional form might influence the distribution of the residuals in a regression model using ordinary least squares technique. Let’s start with a …

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Discussing the Importance of Stationary Residuals in Time Series

A traditional approach of analyzing the residuals in regression models can be identified over the Classical Assumptions in Linear Models (Rodríguez Revilla, 2014), which primarily involves the residuals in aspects as homoscedasticity, no serial correlation (or auto-correlation), no endogeneity, correct specification (this one includes no omitted variables, no redundant variables, and correct functional form) and …

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The evil in the heart of the good: Unfolding the role of remittances in the escalating trade deficit figures of the MENA region.

The MENA region is ranked first in terms of remittance receipts (3.83% of GDP) worldwide, it has also the highest non-oil trade deficit among other developing regions (World Bank, 2018). This study uses panel data from 11 Labor-abundant MENA countries (main destination of remittance receipts) to examine the trade balance effect of remittances. We postulate …

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