A note on GMM-estimation of probit models with endogenous regressors
Joachim Wilde
Statistical Papers,
No. 3,
2008
Abstract
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Capital Stock Approximation using Firm Level Panel Data: A Modified Perpetual Inventory Approach
Steffen Müller
Jahrbücher für Nationalökonomie und Statistik,
No. 4,
2008
Abstract
Many recent studies exploring conditional factor demand or factor substitution issues use firm level panel data. A considerable number of establishment panels contains no direct information on the capital input, necessary for production or cost function estimation. Incorrect measurement of capital leads to biased estimates and casts doubt on any inference on output elasticities or input substitution properties. The perpetual inventory approach, commonly used for long panels, is a method that attenuates these problems. In this paper a modified perpetual inventory approach is proposed. This method provides more reliable measures for capital input when short firm panels are used and no direct information on capital input is available. The empirical results based on a replication study of Addison et al. (2006) support the conclusion that modified perpetual inventory is superior to previous attempts in particular when fixed effects estimation techniques are used. The method thus makes a considerable number of recently established firm panels accessible to more sophisticated production function or factor demand analyses.
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The Stability of Bank Efficiency Rankings when Risk Preferences and Objectives are Different
Michael Koetter
European Journal of Finance,
No. 2,
2008
Abstract
We analyze the stability of efficiency rankings of German universal banks between 1993 and 2004. First, we estimate traditional efficiency scores with stochastic cost and alternative profit frontier analysis. Then, we explicitly allow for different risk preferences and measure efficiency with a structural model based on utility maximization. Using the almost ideal demand system, we estimate input- and profit-demand functions to obtain proxies for expected return and risk. Efficiency is then measured in this risk-return space. Mean risk-return efficiency is somewhat higher than cost and considerably higher than profit efficiency (PE). More importantly, rank–order correlation between these measures are low or even negative. This suggests that best-practice institutes should not be identified on the basis of traditional efficiency measures alone. Apparently, low cost and/or PE may merely result from alternative yet efficiently chosen risk-return trade-offs.
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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,
No. 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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Slippery Slopes of Stress: Ordered Failure Events in German Banking
Thomas Kick, Michael Koetter
Journal of Financial Stability,
No. 2,
2007
Abstract
Outright bank failures without prior indication of financial instability are very rare. In fact, banks can be regarded as troubled to varying degrees before outright closure. But failure studies usually neglect the ordinal nature of bank distress. We distinguish four different kinds of increasingly severe events on the basis of the distress database of the Deutsche Bundesbank. Only the worst distress event entails a bank to exit the market. Since the four categories of hazard functions are not proportional, we specify a generalized ordered logit model to estimate respective probabilities of distress simultaneously. We find that the likelihood of ordered distress events changes differently in response to given changes in the financial profiles of banks. Consequently, bank failure studies should account more explicitly for the different shades of distress. This allows an assessment of the relative importance of financial profile components for different degrees of bank distress.
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Systematic Mispricing in European Equity Prices?
Marian Berneburg
IWH Discussion Papers,
No. 6,
2007
Abstract
One empirical argument that has been around for some time and that clearly contra- dicts equity market efficiency is that market prices seem too volatile to be optimal estimates of the present value of future discounted cash flows. Based on this, it is deduced that systematic pricing errors occur in equity markets which hence can not be efficient in the Effcient Market Hypothesis sense. The paper tries to show that this so-called excess volatility is to a large extend the result of the underlying assumptions, which are being employed to estimate the present value of cash flows. Using monthly data for three investment style indices from an integrated European Equity market, all usual assumptions are dropped. This is achieved by employing the Gordon Growth Model and using an estimation process for the dividend growth rate that was suggested by Barsky and De Long. In extension to Barsky and De Long, the discount rate is not assumed at some arbitrary level, but it is estimated from the data. In this manner, the empirical results do not rely on the prerequisites of sta- tionary dividends, constant dividend growth rates as well as non-variable discount rates. It is shown that indeed volatility declines considerably, but is not eliminated. Furthermore, it can be seen that the resulting discount factors for the three in- vestment style indices can not be considered equal, which, on a risk-adjusted basis, indicates performance differences in the investment strategies and hence stands in contradiction to an efficient market. Finally, the estimated discount rates under- went a plausibility check, by comparing their general movement to a market based interest rate. Besides the most recent data, the estimated discount rates match the movements of market interest rates fairly well.
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Schätzunsicherheit oder Korrelation, Welche Risikokomponente sollten Unternehmen bei der Bewertung von Kreditportfoliorisiken wann berücksichtigen?
Henry Dannenberg
IWH Discussion Papers,
No. 5,
2007
Abstract
Die Bewertung der Ausfallwahrscheinlichkeiten von Ratingklassen, basierend auf historischen Daten, ist mit Schätzunsicherheit verbunden. Zur Bewertung dieser Unsicherheit werden in der Literatur Konfidenzintervalle diskutiert. Diesen liegen allerdings Annahmen bezüglich der Abhängigkeiten zwischen einzelnen Forderungen zugrunde, die im Widerspruch zu den Annahmen der gängigen Kreditportfoliomodelle stehen. Im vorliegenden Beitrag wird anhand von Simulationsstudien gezeigt, dass eine Berücksichtigung von Schätzunsicherheit in kleinen Portfolios gerechtfertigt sein kann, auch wenn dafür Abhängigkeiten vernachlässigt werden müssen. Die Modellierung der Schätzunsicherheit beruht hier auf der Idee der Konfidenzintervalle und der ihnen zugrundeliegenden Verteilungen. Die Ergebnisse der Arbeit sind vor allem für die Modellierung von Forderungsportfolios in Unternehmen von Interesse.
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What Determines the Efficiency of Regional Innovation Systems?
Michael Fritsch, Viktor Slavtchev
Jena Economic Research Papers, Nr. 2007-006,
No. 6,
2007
Abstract
We assess the efficiency of regional innovation systems (RIS) in Germany by means of a knowledge production function. This function relates private sector research and development (R&D) activity in a region to the number of inventions that have been registered by residents of that region. Different measures and estimation approaches lead to rather similar assessments. We find that both spillovers within the private sector as well as from universities and other public research institutions have a positive effect on the efficiency of private sector R&D in the respective region. It is not the mere presence and size of public research institutions, but rather the intensity of interactions between private and public sector R&D that leads to high RIS efficiency. We find that relationship between the diversity of a regions’ industry structure and the efficiency of its innovation system is inversely u-shaped. Regions dominated by large establishments tend to be less efficient than regions with a lower average establishment size.
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Exploring the International Linkages of the Euro Area: A Global VAR Analysis
Stéphane Dées, Filippo di Mauro, M. Hashem Pesaran, Vanessa Smith
Journal of Applied Econometrics,
No. 1,
2007
Abstract
Abstract This paper presents a quarterly global model combining individual country vector error-correcting models in which the domestic variables are related to the country-specific foreign variables. The global VAR (GVAR) model is estimated for 26 countries, the euro area being treated as a single economy, over the period 1979?2003. It advances research in this area in a number of directions. In particular, it provides a theoretical framework where the GVAR is derived as an approximation to a global unobserved common factor model. Using average pair-wise cross-section error correlations, the GVAR approach is shown to be quite effective in dealing with the common factor interdependencies and international co-movements of business cycles. It develops a sieve bootstrap procedure for simulation of the GVAR as a whole, which is then used in testing the structural stability of the parameters, and for establishing bootstrap confidence bounds for the impulse responses. Finally, in addition to generalized impulse responses, the current paper considers the use of the GVAR for ?structural? impulse response analysis with focus on external shocks for the euro area economy, particularly in response to shocks to the US.
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Estimating Monetary Policy Rules for South Africa
Tobias Knedlik
South African Journal of Economics,
2006
Abstract
Das Papier kombiniert die Schätzung des Monetary Conditions Index (MCI) mit einem theoretischen Modell zur optimalen Geldpolitik in Südafrika. Die grundlegende Idee des Beitrags ist, dass die Geldpolitik nicht nur ein Interesse an stabilen monetären Bedingungen im Inlandsbezug, sondern auch an externer Stabilität hat. Im Papier wird das Konzept des MCI vorgestellt und der relative Einfluss von Zins und Wechselkurs auf die Outputlücke geschätzt. Die geschätzten Gewichte sind 1.9:1. Die Schätzergebnisse werden zur Spezifizierung von Operating Targets-Regeln der südafrikanischen Geldpolitik verwendet.
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