Implementing Causality Tests with Panel Data, with an Example from LocalPublic Finance
AbstractThis paper considers estimation and testing of vector autoregression coefficients in panel data, and applies the techniques to analyze the dynamic properties of revenues, expenditures, and grants in a sample of United States municipalities. The model allows for nonstationary individual effects, and is estimated by applying instrumental variables to the quasi-differenced autoregressive equations Q Particular attention is paid to specifying lag lengths and forming convenient test statistics. The empirical results suggest that intertemporal linkages are important to the understanding of state and local behavior. Such linkages are ignored in conventional cross sectional regressions. Also, we present evidence that past grant revenues help to predict current expenditures, but that past expenditures do not help to predict current revenues.
Download InfoIf 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0048.
Date of creation: Mar 1989
Date of revision:
Note: PE LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
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.:
- Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September.
- Ashenfelter, Orley C & Card, David, 1982. "Time Series Representations of Economic Variables and Alternative Models of the Labour Market," Review of Economic Studies, Wiley Blackwell, vol. 49(5), pages 761-81, Special I.
- Craig, Steven G & Inman, Robert P, 1982. "Federal Aid and Public Education: An Empirical Look at the New Fiscal Federalism," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 541-52, November.
- Lundberg, Shelly J, 1985.
"Tied Wage-Hours Offers and the Endogeneity of Wages,"
The Review of Economics and Statistics,
MIT Press, vol. 67(3), pages 405-10, August.
- Shelly J. Lundberg, 1984. "Tied Wage-Hours Offers and the Endogeneity of Wages," NBER Working Papers 1431, National Bureau of Economic Research, Inc.
- Sargan, J D, 1980. "Some Tests of Dynamic Specification for a Single Equation," Econometrica, Econometric Society, vol. 48(4), pages 879-97, May.
- Gallant, A. Ronald & Jorgenson, Dale W., 1979. "Statistical inference for a system of simultaneous, non-linear, implicit equations in the context of instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 275-302.
- Pakes, Ariel & Griliches, Zvi, 1984.
"Estimating Distributed Lags in Short Panels with an Application to the Specification of Depreciation Patterns and Capital Stock Constructs,"
Review of Economic Studies,
Wiley Blackwell, vol. 51(2), pages 243-62, April.
- Ariel Pakes & Zvi Griliches, 1984. "Estimating Distributed Lags in Short Panels with an Application to the Specification of Depreciation Patterns and Capital Stock Constructs," NBER Working Papers 0933, National Bureau of Economic Research, Inc.
- Taylor, John B., 1980. "Output and price stability: An international comparison," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 109-132, May.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Leamer, Edward E., 1985. "Vector autoregressions for causal inference?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 22(1), pages 255-304, January.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
- Hamilton, Bruce W., 1983. "The flypaper effect and other anomalies," Journal of Public Economics, Elsevier, vol. 22(3), pages 347-361, December.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- White, Halbert, 1982. "Instrumental Variables Regression with Independent Observations," Econometrica, Econometric Society, vol. 50(2), pages 483-99, March.
- Lach, Saul & Schankerman, Mark, 1987.
"The Interaction Between Capital Investment and R&D in Science-Based Firms,"
87-36, C.V. Starr Center for Applied Economics, New York University.
- Saul Lach & Mark Schankerman, 1987. "The Interaction Between Capital Investment and R&D in Science-Based Firms," NBER Working Papers 2377, National Bureau of Economic Research, Inc.
- Yalta, A. Yasemin & Yalta, A. Talha, 2012.
"Does financial liberalization decrease capital flight? A panel causality analysis,"
International Review of Economics & Finance,
Elsevier, vol. 22(1), pages 92-100.
- A. Yasemin Yalta & A. Talha Yalta, 2011. "Does Financial Liberalization Decrease Capital Flight? A Panel Causality Analysis," Working Papers 1102, TOBB University of Economics and Technology, Department of Economics.
- Panos, Sousounis, 2008. "State dependence in work-related training participation among British employees: A comparison of different random effects probit estimators," MPRA Paper 14261, University Library of Munich, Germany, revised Mar 2009.
- Erkan Erdil & I. Hakan Yetkiner, 2004. "A Panel Data Approach for Income-Health Causality," Working Papers FNU-47, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2004.
- repec:pri:indrel:626 is not listed on IDEAS
- Daniel S. Hamermesh, 1989. "Why Do Fixed-Effects Models Perform So Poorly? The Case of Academic Salaries," NBER Working Papers 2135, National Bureau of Economic Research, Inc.
- Douglas Holtz-Eakin, 1986. "Testing for Individual Effects in Dynamic Models Using Panel Data," NBER Technical Working Papers 0057, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.