Simulation

[Rogers Ochenge]

Dear team,

i was trying to run a monte carlo for the following DGP




got stuck as i was creating the code

Kindly help

here is the code i was attempting to create before i got stuck
set seed 20170314
set obs 3
gen firmid= _n
expand 10
bys firmid: gen year=_n
gen psi =rnormal(0,1) // panel level effect
gen epsilon=rnormal(0,1)
scalar a1 = 1
scalar a2 = 2
scalar a3 = 3
scalar b=0.5

[Joseph Coveney]

I assume that b is the temporal slope, and that a1 through a3 are intended to be something like firm-level intercepts, and so I'm guessing that you actually want something like a fixed-effect intercept of one.

If so, then try something like the following:

version 17.0 // substitute your Stata release here

clear *

set seed 20170314

// Firms
quietly set obs 3
generate int fid = _n
generate double fid_u = rnormal() // panel-level random effect

// Years
quietly expand 10
bysort fid: generate byte tim = _n

// Linear prediction
generate double xbu = ///
    1 + tim / 2 + /// fixed
    fid_u         //  random

// Outcome (linear prediction + epsilon)
generate double out = xbu + rnormal()

In action:


.ÿversionÿ17.0

.ÿ
.ÿclearÿ*

.ÿ
.ÿseedem
setÿseedÿ2062505660

.ÿ
.ÿ//ÿFirms
.ÿquietlyÿsetÿobsÿ300

.ÿgenerateÿintÿfidÿ=ÿ_n

.ÿgenerateÿdoubleÿfid_uÿ=ÿrnormal()

.ÿ
.ÿ//ÿYears
.ÿquietlyÿexpandÿ10

.ÿbysortÿfid:ÿgenerateÿbyteÿtimÿ=ÿ_n

.ÿ
.ÿ//ÿLinearÿprediction
.ÿgenerateÿdoubleÿxbuÿ=ÿ///
>ÿÿÿÿÿ1ÿ+ÿtimÿ/ÿ2ÿ+ÿ///ÿfixed
>ÿÿÿÿÿÿÿÿÿfid_uÿÿÿÿÿÿÿÿÿ//ÿÿrandom

.ÿ
.ÿ//ÿOutcome
.ÿgenerateÿdoubleÿoutÿ=ÿxbuÿ+ÿrnormal()

.ÿ
.ÿxtregÿoutÿc.tim,ÿi(fid)ÿre

Random-effectsÿGLSÿregressionÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿNumberÿofÿobsÿÿÿÿÿ=ÿÿÿÿÿÿ3,000
Groupÿvariable:ÿfidÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿNumberÿofÿgroupsÿÿ=ÿÿÿÿÿÿÿÿ300

R-squared:ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿObsÿperÿgroup:
ÿÿÿÿÿWithinÿÿ=ÿ0.0000ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿminÿ=ÿÿÿÿÿÿÿÿÿ10
ÿÿÿÿÿBetweenÿ=ÿ0.0000ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿavgÿ=ÿÿÿÿÿÿÿ10.0
ÿÿÿÿÿOverallÿ=ÿ0.5070ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿmaxÿ=ÿÿÿÿÿÿÿÿÿ10

ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿWaldÿchi2(1)ÿÿÿÿÿÿ=ÿÿÿÿ5896.22
corr(u_i,ÿX)ÿ=ÿ0ÿ(assumed)ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿProbÿ>ÿchi2ÿÿÿÿÿÿÿ=ÿÿÿÿÿ0.0000

------------------------------------------------------------------------------
ÿÿÿÿÿÿÿÿÿoutÿ|ÿCoefficientÿÿStd.ÿerr.ÿÿÿÿÿÿzÿÿÿÿP>|z|ÿÿÿÿÿ[95%ÿconf.ÿinterval]
-------------+----------------------------------------------------------------
ÿÿÿÿÿÿÿÿÿtimÿ|ÿÿÿ.4929186ÿÿÿ.0064193ÿÿÿÿ76.79ÿÿÿ0.000ÿÿÿÿÿ.4803369ÿÿÿÿ.5055002
ÿÿÿÿÿÿÿ_consÿ|ÿÿÿ1.126244ÿÿÿ.0685235ÿÿÿÿ16.44ÿÿÿ0.000ÿÿÿÿÿ.9919403ÿÿÿÿ1.260548
-------------+----------------------------------------------------------------
ÿÿÿÿÿsigma_uÿ|ÿÿ.96576202
ÿÿÿÿÿsigma_eÿ|ÿÿ1.0098939
ÿÿÿÿÿÿÿÿÿrhoÿ|ÿÿ.47767329ÿÿÿ(fractionÿofÿvarianceÿdueÿtoÿu_i)
------------------------------------------------------------------------------

.ÿ
.ÿexit

endÿofÿdo-file


.