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Modeling Sample Selection for Durations with Time-Varying Covariates, With an Application to the Duration of Exchange Rate Regimes

Author

Listed:
  • Frederick J. Boehmke
  • Chris Meissner

    (Department of Economics, University of California Davis)

Abstract

We extend existing estimators for duration data that suffer from non-random sample selection to allow for time-varying covariates. Rather than a continuous-time duration model, we propose a discrete-time alternative that models the effects of sample selection at the time of selection across all subsequent years of the resulting spell. Properties of the estimator are compared to those of a naive discrete duration model through Monte Carlo analysis and indicate that our estimator outperforms the naive model when selection is non-trivial. We then apply this estimator to the question of the duration of monetary regimes and find evidence that ignoring selection into pegs leads to faulty inferences.

Suggested Citation

  • Frederick J. Boehmke & Chris Meissner, 2009. "Modeling Sample Selection for Durations with Time-Varying Covariates, With an Application to the Duration of Exchange Rate Regimes," Working Papers 922, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:09-22
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    File URL: http://wp.econ.ucdavis.edu/09-22.pdf
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    More about this item

    Keywords

    exchange rates; de facto regimes; duration; selection models; monetary policy;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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