Qual VAR Revisited: Good Forecast, Bad Story
Makram El-Shagi, Gregor von Schweinitz
Abstract
Due to the recent financial crisis, the interest in econometric models that allow to incorporate binary variables (such as the occurrence of a crisis) experienced a huge surge. This paper evaluates the performance of the Qual VAR, i.e. a VAR model including a latent variable that governs the behavior of an observable binary variable. While we find that the Qual VAR performs reasonably well in forecasting (outperforming a probit benchmark), there are substantial identification problems. Therefore, when the economic interpretation of the dynamic behavior of the latent variable and the chain of causality matter, the Qual VAR is inadvisable.
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FDI and the National Innovation System - Evidence from Central and Eastern Europe
Jutta Günther, Björn Jindra, Johannes Stephan
D. Dyker (ed.), Network Dynamics in Emerging Regions of Europe, Imperial College Press,
2010
Abstract
The paper investigates strategic motives, technological activities and determinants of foreign investment enterprises’ embeddedness in post-transition economies (Eastern Germany and selected Central East European countries). The empirical study makes use of the IWH FDI micro database. Results of the descriptive analysis of investment motives show that market access dominates over efficiency seeking and other motives. The majority of investors are technologically active in the region as a whole, but countries differ in terms of performance. The probit model estimations show that firm specific characteristics, among them innovativeness and autonomy from parent company, are important determinants of foreign investment enterprises’ embeddedness.
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Margins of international banking: Is there a productivity pecking order in banking, too?
Claudia M. Buch
Bundesbank Discussion Paper 12/2009,
2009
Abstract
Modern trade theory emphasizes firm-level productivity differentials to explain
the cross-border activities of non-financial firms. This study tests whether a
productivity pecking order also determines international banking activities. Using
a novel dataset that contains all German banks’ international activities, we
estimate the ordered probability of a presence abroad (extensive margin) and the
volume of international assets (intensive margin). Methodologically, we enrich the
conventional Heckman selection model to account for the self-selection of banks
into different modes of foreign activities using an ordered probit. Four main
findings emerge. First, similar to results for non-financial firms, a productivity
pecking order drives bank internationalization. Second, only a few non-financial
firms engage in international trade, but many banks hold international assets, and
only a few large banks engage in foreign direct investment. Third, in addition to
productivity, risk factors matter for international banking. Fourth, gravity-type
variables have an important impact on international banking activities.
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Forecasting Currency Crises: Which Methods signaled the South African Crisis of June 2006?
Tobias Knedlik, Rolf Scheufele
South African Journal of Economics,
2008
Abstract
In this paper we test the ability of three of the most popular methods to forecast South African currency crises with a special emphasis on their out-of-sample performance. We choose the latest crisis of June 2006 to conduct an out-of-sample experiment. The results show that the signals approach was not able to forecast the out-of-sample crisis correctly; the probit approach was able
to predict the crisis but only with models, that were based on raw data. The Markov-regime- switching approach predicts the out-of-sample crisis well. However, the results are not straightforward. In-sample, the probit models performed remarkably well and were also able to detect, at least to some extent, out-of-sample currency crises before their occurrence. The recommendation is to not restrict the forecasting to only one approach.
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A note on GMM-estimation of probit models with endogenous regressors
Joachim Wilde
Statistical Papers,
Nr. 3,
2008
Abstract
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Three methods of forecasting currency crises: Which made the run in signaling the South African currency crisis of June 2006?
Tobias Knedlik, Rolf Scheufele
IWH Discussion Papers,
Nr. 17,
2007
Abstract
In this paper we test the ability of three of the most popular methods to forecast the South African currency crisis of June 2006. In particular we are interested in the out-ofsample performance of these methods. Thus, we choose the latest crisis to conduct an out-of-sample experiment. In sum, the signals approach was not able to forecast the outof- sample crisis of correctly; the probit approach was able to predict the crisis but just with models, that were based on raw data. Employing a Markov-regime-switching approach also allows to predict the out-of-sample crisis. The answer to the question of which method made the run in forecasting the June 2006 currency crisis is: the Markovswitching approach, since it called most of the pre-crisis periods correctly. However, the “victory” is not straightforward. In-sample, the probit models perform remarkably well and it is also able to detect, at least to some extent, out-of-sample currency crises before their occurrence. It can, therefore, not be recommended to focus on one approach only when evaluating the risk for currency crises.
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A Simple Representation of the Bera-Jarque-Lee Test for Probit Models
Joachim Wilde
IWH Discussion Papers,
Nr. 13,
2007
Abstract
The inference in probit models relies on the assumption of normality. However, tests of this assumption are not implemented in standard econometric software. Therefore, the paper presents a simple representation of the Bera-Jarque-Lee test, that does not require any matrix algebra. Furthermore, the representation is used to compare the Bera-Jarque- Lee test with the RESET-type test proposed by Papke and Wooldridge (1996).
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Does Qualification Drive Innovation? A Microeconometric Analysis Using Linked-employer-employee Data
Bianca Brandenburg, Jutta Günther, Lutz Schneider
IWH Discussion Papers,
Nr. 10,
2007
Abstract
Degree-level science and engineering skills as well as management and leadership skills are often referred to as a source of innovative activities within companies. Broken down by sectoral innovation patterns, this article examines the role of formal education and actual occupation for product innovation performance in manufacturing firms within a probit model. It uses unique micro data for Germany (LIAB) that contain detailed information about innovative activities and the qualification of employees. We find significant differences of the human capital endowment between sectors differentiated according to the Pavitt classification. Sectors with a high share of highly skilled employees engage in product innovation above average (specialized suppliers and science based industries). According to our hitherto estimation results, within these sectors the share of highly skilled employees does not, however, substantially increase the probability to be an innovative firm.
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Who Invests in Training if Contracts are Temporary? - Empirical Evidence for Germany Using Selection Correction
Jan Sauermann
IWH Discussion Papers,
Nr. 14,
2006
Abstract
This study deals with the effect of fixed-term contracts on work-related training. Though previous studies found a negative effect of fixed-term contracts on the participation in training, from the theoretical point of view it is not clear whether workers with fixed-term contracts receive less or more training, compared to workers with permanent contracts. In addition to the existing strand of literature, we especially distinguish between employer- and employee-financed training in order to allow for diverging investment patterns of worker and firm. Using data from the German Socio-Economic Panel (GSOEP), we estimate a bivariate probit model to control for selection effects that may arise from unobservable factors, affecting both participation in training and holding fixed-term contracts. Finding negative effects for employer-sponsored, as well as for employee-sponsored training, leads us to conclude that workers with fixed-term contracts do not compensate for lower firm investments.
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