Re: st: estimating an asymmetrical relationship

[David Jacobs <jacobs.184@sociology.osu.edu>]

Gisella, how about this technique (and let's see what others on the 
list say about it, as it's been a while since I thought about this issue)?

Construct a dummy coded 1 if there's growth in the explanatory 
variable of interest and construct another if there's negative 
change.  Multiply each dummy with the explanatory variable of 
interest thereby creating two interacted explanatory 
variables.  Enter both product terms in a model.  If there's a 
statistically significant difference between the coefficients on the 
two interacted terms, that should provide evidence that you indeed 
have asymmetric effects.


At 11:55 AM 12/15/2009, you wrote:
> This question is partly econometric and partly STATA, and I would 
> greatly appreciate any advice. I need to estimate a relationship 
> which I believe to be asymmetric - between growth as the explanatory 
> variable of interest and unemployment as the dependent variable. 
> Asymmetric in the sense that, while overall I expect a negative 
> relationship, I expect the magnitude of the relationship to be 
> higher when growth is going down than when it is going up (for 
> reasons not necessary to go into here). That is, I expect the 
> coefficient on the relationship to be higher during periods of high 
> or increasing growth than during periods of low or decreasing growth 
> (I realise that high and increasing is not the same thing but I will 
> later figure out which). So I believe that OLS is not appropriate as 
> it will not pick up these differences, and what I am really 
> interested in investigating is whether there is asymmetry and how 
> strong it is. Ideally I would like to get
>  different coefficients for the 2 types of periods (note that this 
> is not one long period and then another long period, but ups and 
> downs). I believe that I need a nonlinear estimation method to do 
> this. But beyond that I am not sure how to proceed and would be 
> terribly grateful for any suggestions.
>
> Thank you very much.
>
> Gisella
>
>
>
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