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Saturday, February 16
Sat, Feb 16, 9:15 AM - 10:45 AM
Canal
Business Applications

Confidence Intervals for Ratios: Econometric Examples with Stata (303736)

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Joseph Hirschberg, University of Melbourne 
*Joseph Hirschberg, University of Melbourne 

Keywords: turning points, quadratic specification, interaction terms, long-run elasticities, willingness-to-pay, NAIRU, 2SLS & ILS

Ratios of parameter estimates are often used in econometric applications. However, the test of these ratios when estimated can cause difficulties since the ratio of asymptotically normally distributed random variables have a Cauchy distribution for which there are no finite moments. This paper presents a method for the estimation of confidence intervals based on the Fieller approach that has been shown to be preferable to the usual Delta method. Using example applications, we demonstrate that a few extra steps in the examination of the estimate of the ratio may provide a confidence interval with superior coverage.