Signs of Impact Effects in Time Series Regression Models

10 Pages Posted: 25 Oct 2013

See all articles by M. Hashem Pesaran

M. Hashem Pesaran

University of Southern California - Department of Economics

Ron Smith

Birkbeck College

Multiple version iconThere are 2 versions of this paper

Date Written: October 24, 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 focussing on the signs of individual coefficients in such regressions could be misleading and argue in favour 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: C100, C500

Suggested Citation

Pesaran, M. Hashem and Smith, Ron P., Signs of Impact Effects in Time Series Regression Models (October 24, 2013). CESifo Working Paper Series No. 4433, Available at SSRN: https://ssrn.com/abstract=2344697 or http://dx.doi.org/10.2139/ssrn.2344697

M. Hashem Pesaran (Contact Author)

University of Southern California - Department of Economics ( email )

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United States

Ron P. Smith

Birkbeck College ( email )

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

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