In this paper, we apply the techniques and tests as they represent from another researcher to estimates econometric model for barley export demand. The data were collected from USDA and FAO. This paper uses different instrumental variable estimations. We test for endogeneity by introducing the Hausman test, test for overidentification by Sargan test, and test the goodness of IV by using F-test.
Table of Contents
1. INTRODUCTION
2. RESEARCH PROBLEM
3. MODEL DEVELOPMENT
4. DATA
5. METHODS AND RESULTS
6. RESULT AND DISCUSSION
7. CONCLUSION
Objectives and Topics
The primary objective of this research is to analyze the export demand for U.S. barley by developing an econometric system of equations. The study investigates factors influencing export quantities, specifically addressing endogeneity issues regarding the U.S. barley price through instrumental variable estimation.
- Econometric modeling of U.S. barley export demand.
- Application of Two-Stage Least Squares (2SLS) estimation.
- Testing for endogeneity using the Hausman test.
- Analysis of supply and demand factors affecting export performance.
- Evaluation of instrumental variable effectiveness using Sargan and F-tests.
Excerpt from the Book
METHODS AND RESULTS
Given that the intention of this paper is to create an econometric model, this section reviews the nature of OLS, and 2SLS that can be used to include a system of equations, as the model shown earlier indicates is necessary.
One of the problems in OLS is that regression coefficients can be biased when the estimated variables are correlated with the error term, and the confidence interval of the coefficient will not be consistent. This comes from the main assumption of regression analysis that the independent variables are uncorrelated with the random error term. If this assumption is incorrect, then OLS is biased and inconsistent. Although there are many estimation methods available to avoid bias in OLS estimation, a very popular method used is two-stage least squares. Essentially, the analyst needs to find a variable to be substituted for the original variable that contains a significant correlation with the original variable but is not associated with the random error. With this, the assumptions in OLS will be maintained. This variable is called an “Instrumental variable” to replace an internal variable such as PB in the first equation.
To reduce the correlations between the error term and independent variables, we used IV estimations. (Alamri, Saghaian, 2017)
Summary of Chapters
INTRODUCTION: This chapter provides an overview of global barley production and the significance of the U.S. market, establishing the economic context for the study.
RESEARCH PROBLEM: This section identifies the critical role of barley in global food and manufacturing, justifying the need to analyze factors affecting U.S. exports.
MODEL DEVELOPMENT: This chapter presents the theoretical supply and demand equations used to derive the final empirical model for U.S. barley exports.
DATA: This section describes the annual data sources (USDA and FAO) utilized for the study covering the period from 1970 to 2016.
METHODS AND RESULTS: This chapter outlines the statistical techniques, specifically OLS and Two-Stage Least Squares (2SLS), and discusses the properties of estimators.
RESULT AND DISCUSSION: This section covers the diagnostic testing, including the Hausman test for endogeneity, and presents the regression results for the various models tested.
CONCLUSION: The final chapter summarizes the findings, concludes that model 7 provides the best fit, and suggests recommendations for future research.
Keywords
Econometric Model, Barley Export, Demand Analysis, Two-Stage Least Squares, 2SLS, Instrumental Variables, Hausman Test, Sargan Test, Endogeneity, U.S. Agriculture, Time Series Analysis, Export Demand, Supply and Demand, Trade Policy, Agricultural Economics
Frequently Asked Questions
What is the core focus of this research paper?
The paper focuses on estimating an econometric model to determine the factors influencing the export demand for U.S. barley.
What are the primary thematic fields covered?
The study covers international agricultural trade, supply and demand theory, econometrics, and specific variables like U.S. ending stocks, livestock numbers, and global consumption patterns.
What is the main research question or objective?
The objective is to examine the effects of U.S. barley exports by estimating a system of export equations and identifying significant drivers of trade quantities.
Which scientific methods are employed in this analysis?
The author uses Ordinary Least Squares (OLS) and Two-Stage Least Squares (2SLS) estimation, alongside diagnostic tests like the Hausman test, Sargan test, and F-test.
What is addressed in the main body of the work?
The main body develops the theoretical models, describes the data collection, performs regression analysis, and compares the results across different model specifications.
Which keywords characterize this paper?
Key terms include Econometric Model, Barley Export, Instrumental Variables, Endogeneity, and Two-Stage Least Squares.
Why is the Hausman test critical for this model?
The Hausman test is used to determine if the U.S. barley price is endogenous; rejecting the null hypothesis confirms that OLS would be biased and 2SLS is necessary.
How did the author handle the potential weakness of instruments?
The author used the F-test in the first stage of regression; results exceeding a critical value of 10 indicated that the instruments were strong enough for valid estimation.
What was the conclusion regarding the best-performing model?
Model 7, which utilized a combination of instrumental variables (USXP, ROWPRO, and USPRO), was determined to be the most robust equation for explaining U.S. barley export demand.
- Arbeit zitieren
- Yosef Alamri (Autor:in), 2018, Econometric Model of the US Barley Export Demand, München, GRIN Verlag, https://www.grin.com/document/386672
