Ec220GlossaryofTerms

Absorbingavariable:aregressionwithaseparatedummyvariableforeveryvalueofthevariable.A
waytoestimatefixedeffectsmodels.
AugmentedDickeyFullertest:Attesttodetectunitrootsintimeseries;theADFtestaddslagged
differencesofthedependentvariabletoaccountforshortrundynamics
Autocorrelationfunction:Thelistofalltheautocorrelationsofatimeseries.Alsocalleda
correlogram
Autoregressionorautoregressiveprocess:atimeseriesprocesswhereYtdependsonitsownlag(s).
Autoregressivedistributedlagmodel:Atimeseriesmodelwithalagofthedependentvariableon
theRHSaswellasthecontemporaneousvalueandpossiblyoneormorelagsofaregressoronthe
RHS
Balance:Equaldistributionofvariableswhichshouldnotbeaffectedbythetreatment(pre
treatmentoutcomesorcharacteristics)acrossatreatmentandcontrolgroup
Bivariateregression:aregressionwithaconstantandoneotherrighthandsidevariable.
Clusteredstandarderrors:Standarderrorswhichallowforcorrelationintheresidualswithina
group(calledacluster).Oftenemployedinpaneldata
Conditioningvariable:Acovariateinaregressionviewedfromtheperspectiveofanotherregressor
(e.g.thecoefficientonX1conditioningonX2).Abitlikeacontrolvariablewithrespecttothe
regressorofinterestbutoftenusedwithamoremechanicalconnotation(theeffectofX1
conditioningonX2doesnothavetobeacausaleffect).
Confounder:avariablewhichiscausallyrelatedtoboththetreatmentandtheoutcome.Not
necessarilyavariableinourregression.
Control:aregressor(ormatchingvariable)weusetoholdconfoundersconstant.Foracausal
regressioncontrolsneedtocaptureallconfounders.
Correlogram:Thelistofalltheautocorrelationsofatimeseries.Alsocalledanautocorrelation
function
Covariate:anyvariableontherighthandsideofaregression,alsocalledregressor,righthandside
variable,independentvariable.
Dependentvariable:variableonthelefthandsideofaregression.
Deterministictrend:atimeserieswherethetrendfunctionismodelledinanonstochasticfashion,
e.g.asalinearfunctionoftime.
Deviationsfrommeansestimator:Amethodtoestimatetheparametersinfixedeffectsmodels
otherthanthefixedeffectsthemselves

DickeyFullertest:Attesttodetectunitrootsintimeseries
Distributedlagmodel:Atimeseriesmodelwiththecontemporaneousvalueandoneormorelags
ofaregressorontheRHS
Dummyvariable:abinaryvariable,avariablethattakesontwovalues,typicallycodedas0and1.
Dynamiccausaleffects:thecausaleffectsofatreatmentinatimeseriesarisingatvariouslagsof
thetreatment
Endogenousvariable:Avariabletobeexplainedinasimultaneousequationsmodel
Exclusionrestriction:Assumptionininstrumentalvariablesmodelsthattheinstrumentonlyaffects
theoutcomethroughthetreatment
Exogenousvariable:Avariablewhichisnotexplainedinasimultaneousequationsmodel.Thisis
eitheranexogenouscovariateoraninstrumentalvariable.
Firstdifference:thedifferencebetweenthecurrentobservationandthefirstlaginatimeseries
Firststage:theregressionofthetreatment(endogenousregressor)ontheinstrumentinatwostage
leastsquaresmodel
Fixedeffects:Aregressionmodelwithadummyvariableforeachoftheunitsinoneofthe
dimensionsofapaneldataset
HACstandarderrors:Heteroskedasticityandautocorrelationconsistentstandarderrorsareused
withtimeseriesdatatoallowforautocorrelationintheresiduals
Heteroskedasticity:thevarianceoftheresidualschangeswiththevalueoftheregressor
Homoskedasticity:thevarianceoftheresidualsisindependentofthevalueoftheregressor
Identification:Determiningwhetheraparticularcoefficientinasimultaneousequationsmodelcan
beestimatedviatwostageleastsquares.
IID:Independentlyandidenticallydistributed.Meansthattheobservationsforavariableare
(statistically)independentlydrawnfromthesamedistribution
Instrumentalvariable:Apredictorofthetreatmentinaninstrumentalvariableregression
Instrumentalvariableregression:Aregressionestimatorwhichcircumventsconfoundingwithout
theneedtocontrolfortheconfounderdirectly.Oftenusedsynonymouswithtwostageleast
squares.
Integration:thepropertyofatimeseriestocontainaunitroot
Interactionterm:theproductoftworegressors
Justidentified:Acoefficientonanendogenousvariableinasimultaneousequationsmodelisjust
identifiedwhenthereisoneinstrumentforthisendogenousvariable.

Lag:theobservationforthepreviousperiodinatimeseries
Linearprobabilitymodel(LPM):AnOLSregressionappliedtoabinarydependentvariable
Logit:Anonlinearregressionmodelforbinarydependentvariablesbasedonthelogisticdistribution
function.
Maineffects:theregressorsX1andX2entereddirectlyinaregressionthatalsoincludesan
interactiontermX1*X2
Marginaleffect:theslope(orderivative)oftheregressionfunctionataparticularpointofa
regressorforanonlinearregressionmodel(foralinearregressionmodelthemarginaleffectisjust
theslopecoefficient).Givestheeffectofaoneunitchangeoftheregressoronthedependent
variable.Inabitofanabuseoflanguagewealsousethetermforthefinitedifferenceoftheeffect
ofadummyvariableregressorwiththedummyonandoff.
Movingaverageprocess:Atimeseriesprocessconsistingofcurrentandlaggedvaluesofawhite
noiseseries
Multivariateregression:aregressionwithaconstantandatleasttwootherrighthandsidevariables.
NeweyWestestimator:anestimatorforheteroskedasticityandautocorrelationconsistentstandard
errors
OrdinaryLeastSquaresorOLS:aregressionestimator
Outcome:variableonthelefthandsideofaregression.Somethingaffectedbythetreatmentina
causalchain.
Overidentified:Acoefficientonanendogenousvariableinasimultaneousequationsmodelisover
identifiedwhenthereismorethanoneinstrumentforthisendogenousvariable.
Paneldata:datawithtwoormoredimensions,oftentimeandsomeindividualunit.
Probit:Anonlinearregressionmodelforbinarydependentvariablesbasedonthenormal
distributionfunction
Randomwalk:atimeseriesprocessoftheformYt=Yt1+ut,AnAR(1)processwithacoefficientof1.
Arandomwalkcontainsaunitroot.
Reducedform:theregressionoftheoutcome(ordependentvariable)ontheinstrumentinatwo
stageleastsquaresoranysimultaneousequationsmodel
Regressor:anyvariableontherighthandsideofaregression,alsocalledcovariate,righthandside
variable,independentvariable.
Regressorofinterest:thevariablewhosecausaleffectontheoutcomewewanttostudy,the
variableforthetreatmentinaregression.
Robuststandarderrors:Standarderrorswhichallowforheteroskedasticityintheresiduals

Saturatedregression:Aregressionspecificationwithaseparatedummyvariableforeverypossible
valuetheRHSvariablescantakeon.Forexample,iftwodummyvariablesappearontheRHSof
yourregressionthenthesaturatedregressionwillhavefourRHSvariables(e.g.aconstant,twomain
effectsandaninteraction;the2x2diffindiffmodelisanexampleforthis)
Secondstage:theregressionoftheoutcomeonthetreatment(endogenousvariable)predicted
fromthefirststageequation
Simultaneousequationsmodel:Amultiequationmodelallowingforvariouscausalrelationshipsto
existsidebyside.Needstobeestimatedbytwostageleastsquares.
Spuriousregression:thetendencytogetsignificantresultsusingstandardttestswhenregressing
nonstationarytimeseriesoneachother
Stationarity:Apropertyoftimeseries.Itmeansthatthedistributionofthetimeseriesdataisthe
samenotmatterinwhatperiodyoulookatthetimeseries
Stochastictrend:Atimeserieswithaunitroot
Timeseries:Avariablewheredifferentobservationscomefromdifferenttimeperiods
Treatment:thevariablewhosecausaleffectontheoutcomewewanttostudy.

Trendstationaryprocess:atimeseriesprocesswhichisstationaryafterremovingadeterministic
trend
Twostageleastsquares:Aregressionestimatorwhichcircumventsconfoundingwithouttheneed
tocontrolfortheconfounderdirectly.Oftenusedsynonymouswithinstrumentalvariables.
Unitroot:Arandomwalkcomponentinatimeseriesprocess
Waldestimator:Aninstrumentalvariablesestimatorforthecaseofaabinaryinstrument.TheWald
estimatoristheratioofthereducedformtothefirststageestimate.
WeightedLeastSquaresorWLS:aregressionestimatorwhichgivesauserspecifiedweighttoeach
observation
Withingroupestimation:Estimationwithfixedeffects;aregressionmodelwithadummyvariable
foreachoftheunitsinoneofthedimensionsofapaneldataset
Whitenoise:Atimeseriesprocessconsistingofindependentlyandidenticallydistributed
observations