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on Discrete Choice Models |
| By: | David Dale (Yandex); Andrei Sirchenko (National Research University Higher School of Economics) |
| Abstract: | We introduce three new STATA commands, nop, ziop2 and ziop3, for the estimation of a three-part nested ordered probit model, the two-part zero-inflated ordered probit models of Harris and Zhao (2007, Journal of Econometrics 141: 1073-1099) and Brooks, Harris and Spencer (2012, Economics Letters 117: 683-686), and a three-part zero-inflated ordered probit model for ordinal outcomes, with both exogenous and endogenous switching. The three-part models allow the probabilities of positive, neutral (zero) and negative outcomes to be generated by distinct processes. The zero-inflated models address a preponderance of zeros and allow them to emerge in different latent regimes. We provide postestimation commands to compute probabilistic predictions and various measures of their accuracy, to access the goodness of fit, and to perform model comparison using the Vuong test (Vuong 1989, Econometrica 57: 307-333) with the corrections based on the Akaike and Schwarz information criteria. We investigate the finite-sample performance of the maximum likelihood estimators by Monte Carlo simulations, discuss the relations among the models, and illustrate the new commands with an empirical application to the U.S. federal funds rate target. |
| Keywords: | ordinal outcomes, zero inflation, nested ordered probit, zero-inflated ordered probit, endogenous switching, Vuong test, nop, ziop2, ziop3, federal funds rate target. |
| JEL: | Z |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:193/ec/2018&r=dcm |
| By: | Monica Billio (Department of Economics, Cà Foscari University of Venice); Roberto Casarin; Matteo Iacopini |
| Abstract: | We propose a new Bayesian Markov switching regression model for multi-dimensional arrays (tensors) of binary time series. We assume a zero-inflated logit dynamics with time-varying parameters and apply it to multi-layer temporal networks. The original contribution is threefold. First, in order to avoid over-fitting we propose a parsimonious parametrization of the model, based on a low-rank decomposition of the tensor of regression coefficients. Second, the parameters of the tensor model are driven by a hidden Markov chain, thus allowing for structural changes. The regimes are identified through prior constraints on the mixing probability of the zero-inflated model. Finally, we model the jointly dynamics of the network and of a set of variables of interest. We follow a Bayesian approach to inference, exploiting the Pólya-Gamma data augmentation scheme for logit models in order to provide an efficient Gibbs sampler for posterior approximation. We show the effectiveness of the sampler on simulated datasets of medium-big sizes, finally we apply the methodology to a real dataset of financial networks. |
| Keywords: | Tensor calculus, tensor decomposition, latent variables, Bayesian statistics, hierarchical prior, networks, zero-inflated model, time series, financial networks |
| JEL: | C13 C33 C51 C53 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2018:14&r=dcm |
| By: | Lang, Jan Hannes |
| Abstract: | This paper uses data on bilateral foreign exposures of domestic banking systems in order to construct early warning models for financial crises that take into account cross-country spill-overs of vulnerabilities. The empirical results show that incorporating cross-country financial linkages can improve the signalling performance of early warning models. The relative usefulness increases from 65% to 87% and the AUROC from 0.89 to 0.97 when weighted foreign variables are added to domestic variables in a multivariate logit early warning model. The findings of the paper also suggest that global variables still play a role in predicting financial crises, even when foreign variables are controlled for, which could suggest that both cross-country spill-overs and contagion are important factors for driving financial crises. A parsimonious model with nine variables that combines domestic, foreign and global variables yields an out-of-sample relative usefulness of 0.82 with Type I and Type II errors of 0.11 and 0.07. JEL Classification: G01, G17, F37, F65 |
| Keywords: | early warning models, financial crises, financial linkages |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20182160&r=dcm |
| By: | Volker Nocke; Nicolas Schutz |
| Abstract: | Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the welfare distortions introduced by market power, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger. |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_024_2018&r=dcm |
| By: | Piper, Alan T. |
| Abstract: | For the last five years, the World Economic Forum’s annual Global Gender Gap Index has been reporting that Nicaragua is one of the most gender equal countries in the world. This is the culmination of a remarkable increase in gender equality in Nicaragua during the past decade, charted by the same index. This paper discusses the Index and the Nicaraguan context and then refers to the results of several waves of the Latinobarometer to investigate whether the change in gender equality has affected Nicaraguans’ (and particularly Nicaraguan women’s) perceptions of their lives and society. The underlying question is therefore whether satisfaction with life, satisfaction with democracy, and opinions about gender equality have, in the average opinion of Nicaraguans, altered between the period when Nicaragua was placed low on the gender equality ranking to when it had attained a high rating on the index just a few years later. The findings, which come from ordered probit regression analysis, reveal some evidence of improvements over this time period. |
| Keywords: | Nicaragua; gender equality; Global Gender Gap Index; life satisfaction; Latinobarometer. |
| JEL: | I31 N36 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86769&r=dcm |