# Re: st: estimating an asymmetrical relationship

 From David Jacobs To statalist@hsphsun2.harvard.edu Subject Re: st: estimating an asymmetrical relationship Date Tue, 15 Dec 2009 13:18:09 -0500

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Construct a dummy coded 1 if there's growth in the explanatory variable of interest and construct another if there's negative change. Multiply each dummy with the explanatory variable of interest thereby creating two interacted explanatory variables. Enter both product terms in a model. If there's a statistically significant difference between the coefficients on the two interacted terms, that should provide evidence that you indeed have asymmetric effects.
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At 11:55 AM 12/15/2009, you wrote:
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This question is partly econometric and partly STATA, and I would greatly appreciate any advice. I need to estimate a relationship which I believe to be asymmetric - between growth as the explanatory variable of interest and unemployment as the dependent variable. Asymmetric in the sense that, while overall I expect a negative relationship, I expect the magnitude of the relationship to be higher when growth is going down than when it is going up (for reasons not necessary to go into here). That is, I expect the coefficient on the relationship to be higher during periods of high or increasing growth than during periods of low or decreasing growth (I realise that high and increasing is not the same thing but I will later figure out which). So I believe that OLS is not appropriate as it will not pick up these differences, and what I am really interested in investigating is whether there is asymmetry and how strong it is. Ideally I would like to get different coefficients for the 2 types of periods (note that this is not one long period and then another long period, but ups and downs). I believe that I need a nonlinear estimation method to do this. But beyond that I am not sure how to proceed and would be terribly grateful for any suggestions.
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Thank you very much.

Gisella

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