Misplaced Pages

#628371

26-460: Misery Index can refer to: Economics [ edit ] Misery index (economics) , adding the unemployment rate to the inflation rate Entertainment [ edit ] Misery Index (band) , an American death metal band from Baltimore Misery Index (album) , a 1997 album by grindcore band Assück The Misery Index (TV series) , an American television series The Misery Index: Notes from

52-559: A significant correlation. The six main methods for testing for cointegration are: If x t {\displaystyle x_{t}} and y t {\displaystyle y_{t}} both have order of integration d =1 and are cointegrated, then a linear combination of them must be stationary for some value of β {\displaystyle \beta } and u t {\displaystyle u_{t}} . In other words: where u t {\displaystyle u_{t}}

78-451: A superior alternative to the use of these asymptotic critical value is to generate critical values from simulations. In practice, cointegration is often used for two ⁠ I ( 1 ) {\displaystyle I(1)} ⁠ series, but it is more generally applicable and can be used for variables integrated of higher order (to detect correlated accelerations or other second-difference effects). Multicointegration extends

104-434: A technique to test hypotheses concerning the relationship between two variables having unit roots (i.e. integrated of at least order one). The usual procedure for testing hypotheses concerning the relationship between non-stationary variables was to run ordinary least squares (OLS) regressions on data which had been differenced. This method is biased if the non-stationary variables are cointegrated. For example, regressing

130-526: Is a form of political economic sabotage employed by corporations to achieve differential accumulation , in this case as an alternative to amalgamation when merger and acquisition opportunities have run out. A 2001 paper looking at large-scale surveys in Europe and the United States concluded that unemployment more heavily influences unhappiness than inflation. This implies that the basic misery index underweights

156-454: Is a genuine relationship between the two. Thus the standard current methodology for time series regressions is to check all-time series involved for integration. If there are ⁠ I ( 1 ) {\displaystyle I(1)} ⁠ series on both sides of the regression relationship, then it is possible for regressions to give misleading results. The possible presence of cointegration must be taken into account when choosing

182-480: Is a test for cointegration that allows for more than one cointegrating relationship, unlike the Engle–Granger method, but this test is subject to asymptotic properties, i.e. large samples. If the sample size is too small then the results will not be reliable and one should use Auto Regressive Distributed Lags (ARDL). Peter C. B. Phillips and Sam Ouliaris (1990) show that residual-based unit root tests applied to

208-427: Is different from Wikidata All article disambiguation pages All disambiguation pages Misery index (economics) Harvard Economist Robert Barro created what he dubbed the "Barro Misery Index" (BMI), in 1999. The BMI takes the sum of the inflation and unemployment rates, and adds to that the interest rate, plus (minus) the shortfall (surplus) between the actual and trend rate of GDP growth. In

234-442: Is estimated, the critical values of this ADF test are non-standard, and increase in absolute value as more regressors are included. If the variables are found to be cointegrated, a second-stage regression is conducted. This is a regression of Δ y t {\displaystyle \Delta y_{t}} on the lagged regressors, Δ x t {\displaystyle \Delta x_{t}} and

260-729: Is stationary. If β {\displaystyle \beta } is known, we can test u t {\displaystyle u_{t}} for stationarity with an Augmented Dickey–Fuller test or Phillips–Perron test . If β {\displaystyle \beta } is unknown, we must first estimate it. This is typically done by using ordinary least squares (by regressing y t {\displaystyle y_{t}} on x t {\displaystyle x_{t}} and an intercept). Then, we can run an ADF test on u t {\displaystyle u_{t}} . However, when β {\displaystyle \beta }

286-533: The Inflation Rate ( CPI-U ) from the Bureau of Labor Statistics . The exact methods used for measuring unemployment and inflation have changed over time, although past data is usually normalized so that past and future metrics are comparable. Cointegration Cointegration is a statistical property of a collection ( X 1 ,  X 2 , ...,  X k ) of time series variables. First, all of

SECTION 10

#1733106866629

312-486: The Economist Intelligence Unit. This table includes a list of 89 countries, ranked from worst to best, with data as of December 31, 2013 (see table below). Political economists Jonathan Nitzan and Shimshon Bichler found a negative correlation between a similar "stagflation index" and corporate amalgamation (i.e. mergers and acquisitions ) in the United States since the 1930s. In their theory, stagflation

338-548: The Plague Years , a 2006 album by Boysetsfire Topics referred to by the same term [REDACTED] This disambiguation page lists articles associated with the title Misery Index . If an internal link led you here, you may wish to change the link to point directly to the intended article. Retrieved from " https://en.wikipedia.org/w/index.php?title=Misery_Index&oldid=1223193234 " Category : Disambiguation pages Hidden categories: Short description

364-476: The cointegrating vector approach, and coined the term. For integrated ⁠ I ( 1 ) {\displaystyle I(1)} ⁠ processes, Granger and Newbold showed that de-trending does not work to eliminate the problem of spurious correlation, and that the superior alternative is to check for co-integration. Two series with ⁠ I ( 1 ) {\displaystyle I(1)} ⁠ trends can be co-integrated only if there

390-441: The cointegration technique beyond two variables, and occasionally to variables integrated at different orders. Tests for cointegration assume that the cointegrating vector is constant during the period of study. In reality, it is possible that the long-run relationship between the underlying variables change (shifts in the cointegrating vector can occur). The reason for this might be technological progress, economic crises, changes in

416-442: The concept of spurious—or nonsense—regression was Udny Yule in 1926. Before the 1980s, many economists used linear regressions on non-stationary time series data, which Nobel laureate Clive Granger and Paul Newbold showed to be a dangerous approach that could produce spurious correlation , since standard detrending techniques can result in data that are still non-stationary. Granger's 1987 paper with Robert Engle formalized

442-502: The consumption series for any country (e.g. Fiji) against the GNP for a randomly selected dissimilar country (e.g. Afghanistan) might give a high R-squared relationship (suggesting high explanatory power on Fiji's consumption from Afghanistan's GNP ). This is called spurious regression : two integrated ⁠ I ( 1 ) {\displaystyle I(1)} ⁠ series which are not directly causally related may nonetheless show

468-460: The crime rate correlate strongly and that the Misery Index seems to lead the crime rate by a year or so. In fact, the correlation is so strong that the two can be said to be cointegrated , and stronger than correlation with either the unemployment rate or inflation rate alone. The data for the misery index is obtained from unemployment data published by the U.S. Department of Labor ( U3 ) and

494-529: The estimated cointegrating residuals do not have the usual Dickey–Fuller distributions under the null hypothesis of no-cointegration. Because of the spurious regression phenomenon under the null hypothesis, the distribution of these tests have asymptotic distributions that depend on (1) the number of deterministic trend terms and (2) the number of variables with which co-integration is being tested. These distributions are known as Phillips–Ouliaris distributions and critical values have been tabulated. In finite samples,

520-460: The lagged residuals from the first stage, u ^ t − 1 {\displaystyle {\hat {u}}_{t-1}} . The second stage regression is given as: Δ y t = Δ x t b + α u t − 1 + ε t {\displaystyle \Delta y_{t}=\Delta x_{t}b+\alpha u_{t-1}+\varepsilon _{t}} If

546-410: The late 2000s, Johns Hopkins economist Steve Hanke built upon Barro's misery index and began applying it to countries beyond the United States. His modified misery index is the sum of the interest, inflation, and unemployment rates, minus the year-over-year percent change in per-capita GDP growth. In 2013 Hanke constructed a World Table of Misery Index Scores by exclusively relying on data reported by

SECTION 20

#1733106866629

572-449: The people's preferences and behaviour accordingly, policy or regime alteration, and organizational or institutional developments. This is especially likely to be the case if the sample period is long. To take this issue into account, tests have been introduced for cointegration with one unknown structural break , and tests for cointegration with two unknown breaks are also available. Several Bayesian methods have been proposed to compute

598-823: The series must be integrated of order d . Next, if a linear combination of this collection is integrated of order less than d, then the collection is said to be co-integrated. Formally, if ( X , Y , Z ) are each integrated of order d , and there exist coefficients a , b , c such that aX  +  bY  +  cZ is integrated of order less than d, then X , Y , and Z are cointegrated. Cointegration has become an important property in contemporary time series analysis. Time series often have trends—either deterministic or stochastic . In an influential paper, Charles Nelson and Charles Plosser (1982) provided statistical evidence that many US macroeconomic time series (like GNP, wages, employment, etc.) have stochastic trends. If two or more series are individually integrated (in

624-442: The time series sense) but some linear combination of them has a lower order of integration , then the series are said to be cointegrated. A common example is where the individual series are first-order integrated ( ⁠ I ( 1 ) {\displaystyle I(1)} ⁠ ) but some (cointegrating) vector of coefficients exists to form a stationary linear combination of them. The first to introduce and analyse

650-417: The unhappiness attributable to the unemployment rate: "the estimates suggest that people would trade off a 1-percentage-point increase in the employment rate for a 1.7-percentage-point increase in the inflation rate." Some economists, such as Hooi Hooi Lean , posit that the components of the Misery Index drive the crime rate to a degree. Using data from 1960 to 2005, they have found that the Misery Index and

676-483: The variables are not cointegrated (if we cannot reject the null of no cointegration when testing u t {\displaystyle u_{t}} ), then α = 0 {\displaystyle \alpha =0} and we estimate a differences model: Δ y t = Δ x t b + ε t {\displaystyle \Delta y_{t}=\Delta x_{t}b+\varepsilon _{t}} The Johansen test

#628371