Closed mkao006 closed 10 years ago
Actually, instead of binary it should be the average of the binary which indicates the proportion of country with increasing or decreasing yield.
proportion shocks implemented in shocklme4 and shown to be more robust than the mean.
Shocks and variation are no longer in the methodology due to the high variance nature of the estimates under extreme sparsity.
Test the performance of additive model with large smoothing to capture the non-linearity while allowing shocks to be modelled by a binary variable.
The binary variable will be more robust in comparison to the mean regressor in particularly under the influence of shocks in high yield countries.