Signs of Impact Effects in Time Series Regression Models

9 Pages Posted: 10 Oct 2013

See all articles by M. Hashem Pesaran

M. Hashem Pesaran

University of Southern California - Department of Economics; University of Cambridge - Trinity College (Cambridge)

Ron Smith

Birkbeck College

Multiple version iconThere are 2 versions of this paper

Date Written: October 7, 2013

Abstract

In this paper we consider the problem of interpreting the signs of the estimated coefficients in multivariate time series regressions where the regressors are correlated. Using a continuous time model, we argue that focusing on the signs of individual coefficients in such regressions could be misleading and argue in favor of allowing for the indirect effects that arise due to the historical correlations amongst the regressors. For estimation from discrete time data we show that the sign of the total impact, including the direct and indirect effects, of a regressor can be obtained using a simple regression that only includes the regressor of interest.

Keywords: Regression coefficients, Impact effects

JEL Classification: C1, C5

Suggested Citation

Pesaran, M. Hashem and Smith, Ron P., Signs of Impact Effects in Time Series Regression Models (October 7, 2013). CAFE Research Paper No. 13.22, Available at SSRN: https://ssrn.com/abstract=2338124

M. Hashem Pesaran (Contact Author)

University of Southern California - Department of Economics

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

University of Cambridge - Trinity College (Cambridge) ( email )

United Kingdom

Ron P. Smith

Birkbeck College ( email )

Malet Street
London WC1E 7HX
United Kingdom
+44 207 631 6413 (Phone)
+44 207 631 6416 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
53
Abstract Views
533
rank
317,458
PlumX Metrics