Advanced Search
MyIDEAS: Login

Clustering Regression Functions in a Panel

Contents:

Author Info

  • Farshid Vahid

    (Monash University)

Abstract

When time series data of a reasonable length for several cross sectional units are available (for example in the analysis of CO2 emission in industrial countries, or the estimation of production functions for 20 manufacturing sectors), researchers begin by testing whether the data can be pooled and a single dynamic model can be built for all cross sectional units. The "pooling restriction" is often rejected, and then researchers usually proceed by estimating separate dynamic regressions for each cross sectional unit. However, it has been noted in many of such situations that using the pooled model, or shrinking the individual models towards the pooled model, produces superior forecasts relative to individual models. We note that rejecting the grand pooling restriction does not necessarily imply that all cross sectional units must be different. This paper suggests a hierarchical clustering algorithm with a global objective function, to partially pool regressions when the overall pooling restriction is rejected by the data. In addition to the lack of fit and lack of parsimony, the objective function also penalizes lack of conformity with theoretical priors and imprecision in the estimated parameters. This algorithm is used for clustering the gasoline demand functions of OECD countries. The results are compared with those of an alternative method based on a classification and regression tree (CART) procedure. Keywords: Medium sized panels, cluster analysis, information criteria, minimum message length, classification and regression tree (CART).

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://fmwww.bc.edu/RePEc/es2000/0251.pdf
File Function: main text
Download Restriction: no

Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0251.

as in new window
Length:
Date of creation: 01 Aug 2000
Date of revision:
Handle: RePEc:ecm:wc2000:0251

Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Email:
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
  2. Vahid, Farshid & Engle, Robert F., 1997. "Codependent cycles," Journal of Econometrics, Elsevier, vol. 80(2), pages 199-221, October.
  3. Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
  4. Duck, Nigel W, 1993. "Some International Evidence on the Quantity Theory of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 1-12, February.
  5. Baltagi, Badi H. & Griffin, James M., 1983. "Gasoline demand in the OECD : An application of pooling and testing procedures," European Economic Review, Elsevier, vol. 22(2), pages 117-137, July.
  6. Anderson, Heather M. & Vahid, Farshid, 1998. "Testing multiple equation systems for common nonlinear components," Journal of Econometrics, Elsevier, vol. 84(1), pages 1-36, May.
  7. Maddala, G S, et al, 1997. "Estimation of Short-Run and Long-Run Elasticities of Energy Demand from Panel Data Using Shrinkage Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 90-100, January.
  8. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  9. Ramanathan, Ramu & Engle, Robert & Granger, Clive W. J. & Vahid-Araghi, Farshid & Brace, Casey, 1997. "Shorte-run forecasts of electricity loads and peaks," International Journal of Forecasting, Elsevier, vol. 13(2), pages 161-174, June.
  10. Baltagi, Badi H. & Griffin, James M., 1997. "Pooled estimators vs. their heterogeneous counterparts in the context of dynamic demand for gasoline," Journal of Econometrics, Elsevier, vol. 77(2), pages 303-327, April.
  11. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  12. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  13. Bearse, Peter M & Bozdogan, Hamparsum & Schlottmann, Alan M, 1997. "Empirical Econometric Modelling of Food Consumption Using a New Informational Complexity Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(5), pages 563-86, Sept.-Oct.
  14. Hirschberg, Joseph G. & Maasoumi, Esfandiar & Slottje, Daniel J., 1991. "Cluster analysis for measuring welfare and quality of life across countries," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 131-150, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Enrica De Cian & Elisa Lanzi & Roberto Roson, 2013. "Seasonal temperature variations and energy demand," Climatic Change, Springer, vol. 116(3), pages 805-825, February.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:0251. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.