How to Calculate the Marginal Effect When a Variable is Zero?

In summary, The speaker is working on their thesis, specifically estimating a statistical equation involving the growth rate of variables. They are seeking advice on how to calculate the marginal effect of an increase in dlnx on dlny when z is equal to zero. They are struggling with the fact that dlnz is not defined in this case.
  • #1
ad4stra
2
0
Hi everyone! I have (I think a major) problem so I'm hoping you could give me some useful advice.
I am working on my thesis where I am statistically estimating this type of equation:

dlny=α+β1*dlnx+β2*dlnz+β3*dlnx*dlnz

where dln stands for differencing a natural logarithm of the variable, eg

dlnz=ln(zt)-ln(zt-1)

so basically the approximation of the growth rate of x.

After I estimate this equation, I get certain values for α and for the βs and I have this nice equation.

My research question is:
What will be the marginal effect of an increase in dlnx on dlny if z doesn't exist (ie it is zero).

Obviously, the derivative of dlny with respect to dlnx is

∂lny/∂lnx=β13*dlnz

and now I need to calculate how much that is when z (not dlnz) doesn't exist.

Obviously, I have problem since dlnz in this case isn't defined:

dlnz=ln(0)-ln(0)

Is there any way I can manipulate mathematically my problem in order to get an answer to my question??

Thank you very much in advance!
 
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  • #2
* so basically the approximation of the growth rate of z
 

What is a limit calculation?

A limit calculation is a mathematical process used to find the value that a function approaches as its input approaches a specific value. It is often used to analyze the behavior of functions and determine their maximum or minimum values.

Why is it important to calculate limits?

Calculating limits is important because it allows us to understand the behavior of a function and make predictions about its values. It is also a fundamental concept in calculus and is used in many real-world applications.

What are the different types of limits?

The three main types of limits are one-sided limits, two-sided limits, and infinite limits. One-sided limits consider the behavior of a function from only one direction, while two-sided limits consider both directions. Infinite limits occur when the function approaches positive or negative infinity.

How do I calculate a limit using algebraic manipulation?

To calculate a limit using algebraic manipulation, you can try simplifying the expression by factoring, cancelling, or using algebraic rules such as the sum and product rules. You can also use L'Hopital's rule, which involves taking derivatives of the function.

Are there other methods for calculating limits?

Yes, there are other methods for calculating limits, such as using a graphing calculator or online limit calculator, using numerical methods such as the bisection method or the Newton-Raphson method, or using geometric intuition to estimate the limit. However, algebraic manipulation is typically the most commonly used method.

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