A Dataset for Examining the Problem of the Use of Accounting Semi-Identity-Based Models in Econometrics

The problem of using accounting semi-identity-based (ASI) models in Econometrics can be severe in certain circumstances, and estimations from OLS regressions in such models may not accurately reflect causal relationships. This dataset was generated through Monte Carlo simulations, which allowed for the precise control of a causal relationship. The problem of an ASI cannot be directly demonstrated in real samples, as researchers lack insight into the specific factors driving each company’s investment policy. Consequently, it is impossible to distinguish whether regression results in such datasets stem from actual causality or are merely a byproduct of arithmetic distortions introduced by the ASI. The strategy of addressing this issue through simulations allows researchers to determine the true value of any estimator with certainty. The selected model for testing the influence of the ASI problem is the investment-cash flow sensitivity model (Fazzari, Hubbard and Petersen (FHP hereinafter) (1988)), which seeks to establish a relationship between a company’s investments and its cash flows and which is an ASI as well. The dataset included randomly generated independent variables (cash flows and Tobin’s Q) to analyze how they influence the dependent variable (cash flows). The Monte Carlo methodology in Stata enabled repeated sampling to assess how ASIs affect regression models, highlighting their impact on variable relationships and the unreliability of estimated coefficients. The purpose of this paper is twofold: its first goal is to provide a deeper explanation of the syntax in the related article, offering more insights into the ASI problem. The openly available dataset supports replication and further research on ASIs’ effects in economic models and can be adapted for other ASI-based analyses, as the information comprised in the reusability examples prove. Second, our aim is to encourage research supported by Monte Carlo simulations, as they enable the modeling of a comprehensive ecosystem of economic relationships between variables. This allows researchers to address a variety of issues, such as partial correlations, heteroskedasticity, multicollinearity, autocorrelation, endogeneity, and more, while testing their impact on the true value of coefficients.