Suchergebnisse

We look at conventional methods for removing endogeneity bias in regression models, including the linear model and the probit model. It is known that the usual Heckman two-step procedure should not be used in the probit model: from a theoretical perspective, it is unsatisfactory, and likelihood methods are superior. However, serious numerical problems occur when standard software packages try to maximize the biprobit likelihood function, even if the number of covariates is small. We draw conclusions for statistical practice. Finally, we prove the conditions under which parameters in the model are identifiable. The conditions for identification are delicate; we believe these results are new.

European-wide monetary aggregates constructed from pre-unification data cannot be used as evidence that money demand in the Euro area is stable. To overcome the Lucas critique, we apply the standard foreign exchange rate model. Since the uncoordinated country-specific money supply system is abolished, the increased comovement between local monetary aggregates leaves little room for a free ride on the law of large numbers. Current monetary policy decisions must be based on untested relations, & given "the long & variable lags." We conclude that the road toward monetary stability is a nonactivist steady money supply policy. 4 Tables, 1 Figure, 36 References. Adapted from the source document.