Cross Country Regression

[ijyliu]

I have an old paper I wrote on foreign aid where I looked at a cross country panel of countries. I have another paper where I looked at central bank independence and fixed exchange rates and political instability. These were very OLS/classical regression based.

But I think cross country regressions are good for techniques in this class because the data is limited relative to the number of possible models, as he keeps mentioning. Also, there are tons of public datasets from the world bank and oecd, etc where we can easily get a massive amount of regressors.

[ijyliu]

Kind of random, but I feel like defense spending could have interesting effects

[ijyliu]

We could look at spillovers in defense spending between countries using the LASSO (like the R&D spillovers model).

A hypothesis is that spending in neighboring countries increases local spending.

Need to search the literature on this. Someone has probably already done it.

[ijyliu]

Literature updates: seems like the main approach is spacial autoregression: https://www.sciencedirect.com/science/article/pii/S0176268017301581

I think we could provide an interesting generalization by not imposing/assuming that the model is spatial... I mean, the US and China and the UK and Russia aren't exactly neighbors. There might be some ideological axis that's not well captured yet.

VDem has so much data that we could probably even get at heterogeneity in spillover effects- under what circumstances does a neighbor's civil war, etc. lead to more spending? Are effects stronger/weaker for ethnic conflicts, for example?

Here's all the defense spending data: https://www.sipri.org/databases/milex

Textual data analysis: UN resolutions or NATO statements or something? Text data or PCA might allow for a nice look at any potential ideological dimension/other dimensions not easily ascertainable from the numbers

[ijyliu]

Here's a triple LASSO involving military spending but the question is different (it's looking at the fiscal multiplier): https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3819192

Gotten to the 10th page of google scholar and still haven't found anyone trying to do this yet...

I wonder if sparsity is wise in this case. It seems like NATO or the US or USSR could have influence on the spending of a lot of countries. Then again, based off the patent example discussed in class, that's not a problem; we don't have issues if one country affects a lot of others, only if all countries are affected by a lot of countries.

[ijyliu]

Discussion of defense spending continues (in the better organized) #8 but this issue is still open for general ideas along the lines of cross country regression