So nobody answered my question and I hope it was because it was a difficult problem and not because my posting was too unclear!
Anyway, I think I found an answer to my question. The Wooldridge textbook considers the issue of sample selection, truncated samples, and attrition in panel data in chapter 17 of his book. It's relatively simple to follow and also considers the case of heteroskedasticity and serially correlated residuals, in case you are interested.
I still have one more issue in my estimation, but I'll post this message separately.
Best regards,
Adrian
>> From: [email protected]
>> To: [email protected]
>> Subject: st: Sample selection with autocorrelated errors
>> Date: Fri, 17 Jul 2009 15:41:25 -0400
>>
>> Hello everyone!
>>
>> I posted the message below earlier but I have decided to change the subject and make it a bit more general and see if you guys can suggest some references.
>>
>> As my message below describes, I would like to run a model in which there is a sample selection component and autocorrelation in the errors. The problem is that, because of selection, some of the past residuals are not observed.
>>
>> Also, each observation is a bond issued by a given country, so observations are "clustered" both by the different countries that issue these bonds, and by the time period in which they were issued (e.g., a country may issue 3 bonds in a given quarter-year, and then none for the next two quarters, and then 2 the following quarter, and so on).
>>
>> Could you suggest how I can address these problems or can you point at any references?
>>
>> Thank you very much!!
>>
>> Adrian
>>
>> ----------------------------------------
>>> From: [email protected]
>>> To: [email protected]
>>> Subject: st: ARCH disturbances in truncated samples?
>>> Date: Thu, 16 Jul 2009 17:27:49 -0400
>>>
>>> I am running a model that has the spread of a bond as a dependent variable and a bunch of domestic and global variables on the right-hand side. The spread is an inverse measure of the price for which the bond is sold to potential bondholders and gives a sense of the bond issuer's creditworthiness (higher spread indicates lower creditworthiness). Examples of domestic variables are GDP growth, debt/GDP, reserves/imports for each individual country where the bond issuer resides, while examples of global variables are the US interest rate and various liquidity and volatility indices.
>>>
>>> One problem is that I have quarterly macroeconomic data but I only observe the spread whenever countries actually issue a bond. Countries may decide not to issue a bond because the market will simply not buy the bond (for example, in the middle of a crisis) or simply because the country doesn't want to issue it (one quarter they may issue 3 bonds and the next quarter they may not need to issue at all).
>>>
>>> Now I am not exactly sure of how to model this other than with a Heckman selection model (let me know if you have other suggestions). One problem is that I think my errors are not standard Normal, iid errors... but that I think they follow some sort of ARCH structure -- for a given country, for example, the error this period may be related to the error in the previous period. The problem is that "the previous period" may not be exactly t-1... but the previous period when there was a bond issue...
>>>
>>> How do I account for this?
>>>
>>> Thank you very much in advance...
>>>
>>> Adrian
>>>
>>>
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