Estimation of Nested and Zero-Inflated Ordered Probit Models

David Dale () and Andrei Sirchenko
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David Dale: Yandex

HSE Working papers from National Research University Higher School of Economics

Abstract: We introduce three new STATA commands, nop, ziop2 and ziop3, for the estimation of a three-part nested ordered probit model, the two-part zero-inflated ordered probit models of Harris and Zhao (2007, Journal of Econometrics 141: 1073-1099) and Brooks, Harris and Spencer (2012, Economics Letters 117: 683-686), and a three-part zero-inflated ordered probit model for ordinal outcomes, with both exogenous and endogenous switching. The three-part models allow the probabilities of positive, neutral (zero) and negative outcomes to be generated by distinct processes. The zero-inflated models address a preponderance of zeros and allow them to emerge in different latent regimes. We provide postestimation commands to compute probabilistic predictions and various measures of their accuracy, to access the goodness of fit, and to perform model comparison using the Vuong test (Vuong 1989, Econometrica 57: 307-333) with the corrections based on the Akaike and Schwarz information criteria. We investigate the finite-sample performance of the maximum likelihood estimators by Monte Carlo simulations, discuss the relations among the models, and illustrate the new commands with an empirical application to the U.S. federal funds rate target.

Keywords: ordinal outcomes; zero inflation; nested ordered probit; zero-inflated ordered probit; endogenous switching; Vuong test; nop; ziop2; ziop3; federal funds rate target. (search for similar items in EconPapers)
JEL-codes: Z (search for similar items in EconPapers)
Pages: 26 pages
Date: 2018
New Economics Papers: this item is included in nep-dcm, nep-ecm and nep-ict
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Published in WP BRP Series: Economics / EC, May 2018, pages 1-26

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https://wp.hse.ru/data/2018/05/30/1149319504/193EC2018.pdf (application/pdf)

Related works:
Journal Article: Estimation of nested and zero-inflated ordered probit models (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:193/ec/2018

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