Wednesday, May 30, 2018

State Space Models with Fat-Tailed Errors and the sspacetdist add-in

Author and guest post by Eren Ocakverdi.

Linear State Space Models (LSSM) provide a very useful framework for the analysis of a wide range of time series problems. For instance; linear regression, trend-cycle decomposition, smoothing, ARIMA, can all be handled practically and dynamically within this flexible system.
One of the assumptions behind LSSM is that the errors of the measurement/signal equation are normally distributed. In practice, however, there are situations where this may not be the case and errors follow a fat-tailed distribution. Ignoring this fact may result in wider confidence intervals for the estimated parameters or may cause outliers to bias parameter estimates.

Tuesday, October 17, 2017

10+ New Features Added to EViews 10

EViews 10+ is a free update to EViews 10, and introduces a number of new features, including:
  • Chow-Lin, Denton and Litterman frequency conversion with multiple indicator series.
  • Model dependency graphs.
  • US Bureau of Labor Statistics (BLS) data connectivity.
  • Introduction of the X-13 Force option for forcing annual totals.
  • Expansion of the EViews 10 snapshot system to program files.
  • A new help command.
All current EViews 10 users can receive the following new features. To update your copy of EViews 10, simply use the built in update feature (Help->EViews Update), or manually download the latest EViews 10 patch.

Tuesday, August 8, 2017

Dumitrescu-Hurlin Panel Granger Causality Tests: A Monte Carlo Study

With data availability at its historical peak, time series panel econometrics is in the limelight. Unlike traditional panel data in which each cross section $i = 1, \ldots, N$ is associated with $t=1, \ldots, T < N$ observations, what characterizes time series panel data is that $N$ and $T$ can both be very large. Moreover, the time dimension also gives rise to temporal dynamic information and with it, the ability to test for serial correlation, unit roots, cointegration, and in this regard, also Granger causality.

Wednesday, July 26, 2017

Hamilton’s “Why you should never use the Hodrick-Prescott Filter”

Professor James D. Hamilton requires no introduction, having been one of the most important researchers in time series econometrics for decades.
Over the past few years, Hamilton has been working on a paper calling on applied economists to abandon the ubiquitous Hodrick-Prescott Filter and replace it with a much simpler method of extracting trend and cycle information from a time series.
This paper has become popular, and a number of our users have asked how to replicate it in EViews. One of our users, Greg Thornton, has written an EViews add-in (called Hamilton) that performs Hamilton’s method.  However, given its relative simplicity, we thought we’d use a blog post to show manual calculation of the method and replicate the results in Hamilton’s paper.

Tuesday, May 16, 2017

AutoRegressive Distributed Lag (ARDL) Estimation. Part 3 - Practice

In Part 1 and Part 2 of this series, we discussed the theory behind ARDL and the Bounds Test for cointegration. Here, we demonstrate just how easily everything can be done in EViews 9 or higher.

While our two previous posts in this series have been heavily theoretically motivated, here we present a step by step procedure on how to implement Part 1 and Part 2 in practice.

Monday, May 8, 2017

AutoRegressive Distributed Lag (ARDL) Estimation. Part 2 - Inference

This is the second part of our AutoRegressive Distributed Lag (ARDL) post. For Part 1, please go here, and for Part 3, please visit here.

In this post we outline the correct theoretical underpinning of the inference behind the Bounds test for cointegration in an ARDL model. Whilst the discussion is by its nature quite technical, it is important that practitioners of the Bounds test have a grasp of the background behind its inferences.

Friday, April 28, 2017

Dynamic Factor Models in EViews

One of the current buzz topics in macro-econometrics is that of dynamic factor models. 

Factor models allow researchers to work with a large number of variables by reducing them down to a handful (often two) components, allowing tractable results to be obtained from unwieldy data. 

A natural extension to factor models is to allow dynamics to enter the relationships.  These dynamic factor models have become extremely popular due to their ability to model business cycles, and perform both forecasting and nowcasting (predicting the current state of the economy).

Although EViews has built-in factor analysis, we do not (yet!) have dynamic factor models included. 

Luckily two researchers from the Ministry of Finance in Sweden have recently posted a paper, and corresponding code, that estimates dynamic factor models in EViews with a simple programming subroutine utilising EViews' state-space estimation object.

This paper looks fantastic - good job guys!