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Re: RE: st: Fixed effects - not quite invariant variables?
From
"Justina Fischer" <[email protected]>
To
[email protected]
Subject
Re: RE: st: Fixed effects - not quite invariant variables?
Date
Mon, 15 Oct 2012 13:46:38 +0200
Hi Fernando
as a non-technical comment: if your analysis is for OECD countries, real-life variation over time between 1997 and 2010 will be low.
In that case you might consider
a) doing your analysis for a cross-section based on averages (as in the growth literature given to you before)
b) including more countries, particularly emerging economies. But please be aware that the identifiation of the effect will be driven by these countries then.
HTH
Justina
-------- Original-Nachricht --------
> Datum: Mon, 15 Oct 2012 11:33:56 +0000
> Von: [email protected]
> An: [email protected]
> Betreff: RE: st: Fixed effects - not quite invariant variables?
> Hello Guo,
> Many thanks. I know it might not be consistent, but I wonder if there was
> a way of overcoming this problem. When I use Fixed Effects Vector
> Decomposition I have significant results, but I've been advised not to use such
> method as apparently it is not consistent. The coefficients under FEVD were in
> fact much larger.
> Thanks
> Fernando
>
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of Guo Xu
> Sent: 15 October, 2012 11:35 AM
> To: [email protected]
> Subject: Re: st: Fixed effects - not quite invariant variables?
>
> Hi,
>
> When regressors are not changing much (as in your case), FE is prone
> to measurement errors - have a look at the discussion in these
> applications, it may help:
>
> Barro, Robert J. (2000) 'Inequality and growth in a panel of
> countries.' Journal of Economic
> Growth 5(1), 5-32
>
> Banerjee and Duflo (2003) 'Inequality and Growth: What Can the Data Say?'
>
> Guo
>
>
> On 15 October 2012 09:17, fernando luiz mistura <[email protected]>
> wrote:
> >
> > Hi,
> > I have an unbalanced panel data with 180 observations. Data is for 56
> countries for the years 1997, 2003, 2006, 2010. I want to see what is the
> effect of an Index variable of FDI restrictions that ranges between 0 and 1 in
> the level of countries' FDI. Under Pooled OLS and Random Effects, the
> index variable is significant as expected.
> > My problem is with fixed effects. The index variable for some contries
> do not change, as countries have liberalised in a period earlier that the
> one covered. For other countries, there are either small or large changes.
> Hence, under Fixed Effects however, the Index variable is not significant and
> the coefficients smaller.
> > Could someone please explain me if the FE would still be appropriate
> even with this type of semi-variant variable? And if this issue could be
> addressed with an Instrumentral variable approach (hausmann taylor) even if its
> not a endogenous variable?
> > Many thanks
> > Fernando
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