Skip to main content

Importance of exploratory data analysis of dummy variables, logit/probit using eviews

By IMPRI Team 
IMPRI Generation Alpha Data Centre (GenAlphaDC) along with IMPRI Impact and Policy Research Institute, New Delhi conducted a Two-Week Immersive Online Hands-On Certificate Training Course on Exploratory Data Analysis with Categorical Variables Regression Models Dummy Variables and Logit/Probit using EViews, on December 10 and 17, 2022. The expert trainer for the course was Professor Nilanjan Banik, Professor at Mahindra University. He is a Visiting Consultant at IMPRI and an Academic Consultant with Geneva Network, United Kingdom, and a Senior Consultant with Hankuk University of Foreign Studies, South Korea.
The convenors for the event were Prof Vibhuti Patel, Visiting Professor at IMPRI and a Former Professor, Tata Institute of Social Sciences (TISS), Mumbai; Dr Soumyadip Chattopadhyay, Associate Professor, Economics, Visva-Bharati, Santiniketan and a Visiting Senior Fellow, IMPRI; Dr Arjun Kumar, Director, IMPRI. The training course had participants from the field of data and policy– including students, professionals, researchers, and many others.

Day 1 | December 10, 2022

The session began by going through the basics of Regression. The first question he pondered upon is what the meaning of a “dummy” is. He stated that in essence, it means a replica. Here, in a regression model, if X is a dummy variable, it means that it is a qualitative variable. He began by laying down some assumptions about the dependent and the independent variables. First, X and the Error Term (e) are not related, if related, there will be a problem of endogeneity. X is not quantitative if it is a dummy variable. He explained how we can constitute various qualitative traits in a dummy variable such as gender, and ethnicity among others in a regression model. It tries to capture the impact of any variable that is qualitative in nature.
Second, he mentioned that a dummy variable can capture any break or shift in data. He used the example of the Indian economic reforms of 1991, which was a breakpoint in terms of per capita GDP levels. After 1991 there was a big jump in GDP growth. In other words, there was a structural break. Dummy variables can capture such structural breaks. Thirdly, he mentioned that dummy variables can also be used to de-seasonalize the data. Using Excel, he showed how to incorporate dummy variables in a regression model and how dropping a dummy variable is important in order to avoid a Dummy Trap. He also showed how to de-seasonalize the data, using Excel. After de-seasonalizing the graph turned out to be more stable than before.
After explaining over Excel, he showcased the same data set on EViews. He selected the variables such as sales figures, trends, etc. He then created the dummy variables out of the four quarters. He ran the regression without the dummy first. Then he showcased a data set where he introduced a dummy and ran the regression. The data set used was US Trends in Gross Personal Income and Gross Personal Savings from 1959 to 2007. The dummy variables reflected the recession points from 1981 to 1984. The regression diagram consequently showed the breaking point due to the recession of 1981. The session ended for the day with this, after which, Professor Banik went on to take questions and clear doubts of the trainees. The next class was saved to learn Logit and Probit Models.

Day 2 | December 17, 2022

The second day of the session conducted by Professor Nilanjan Banik, titled, “Exploratory Data Analysis with Categorical Variables Regression Models: Dummy Variables and Logit/Probit using EViews” was devoted to the concepts of Logit and Probit. Professor Banik started by explaining the basic equation of a regression model, and the components within it. Here, the motive was to explain the concept of dummy variables, and the Probit/Logit model, when the variables X and Y are qualitative respectively. Then with an example of hourly wage rates, he showed how to interpret dummy variables for various categorical variables.
After explaining dummy variables, he followed it up by talking about Logit functions. He mentioned that in Logit functions, the dependent variable, Y, takes values of 1 or 0. The Logit or Probit model describes the odds of an individual meeting the outcome variable, given a certain trait or characteristic. He mentioned the importance of LR tests in Probit models. The Logit/Probit models primarily deal with the dependent variable (Y). He showed that the Y variable takes values between negative infinity to positive infinity. He proved this by showing the method to derive the value of Y using Probability. Since the P value will be between the value of 0 and 1, the Y value will take the value of negative Infinity to positive infinity.
After delving into theory, he started a practical lesson on the above discussions with the help of a data set on EViews. First, he showed how to introduce dummy variables on a set of observations. Then, Professor Banik went on to show how to interpret Logit functions on EViews. For this, he again used the previous US data on Savings and Income to show the recession point. Using other data he showed how smoking is affected by age, income, and education. He explained what the P value shows using the formula for the same. He also showed it practically based on the regression model and the results generated from it. Then he took questions from the trainees which he promptly clarified. With this, the two-day training course ended.
Acknowledgement: Aaswash Mahanta is a research intern at IMPRI



Sengol imbroglio suggests reason why Modi, BJP don't respect modern Indian history

By Vidya Bhushan Rawat*  The new parliament building opened on February 28. It looks it is not the Parliament but part of #Pratinidhisabhas ' started by earstwhile #princelystates in India. The #BJP for long has been acting as if India is a #Kingdom and Modi ji the new #King of India. Even at the coronations of Kings, you find a large number of people, and dignitaries but look at the opening ceremony we have only one face as if he build everything. Is it the dream of a republic.

Cave of Spleen - a feminist perspective: Status of women in early 18th century England

The Cave of Spleen: Aubrey Beardsley's illustration for Pope's “The Rape of the Lock” By Pragya Ranjan  "The Rape of the Lock" by Alexander Pope published in 1712 is a mock-heroic narrative which satirically glorifies trivial incident of cutting of locks of protagonist Belinda. This poem was written in the Augustan Era (1660-1784) which is marked by the period of scientific reason and rationality, whose effect can be seen on the writers of those times. This timeline is particularly important to analyse the episode of the Cave of Spleen.

Abrogation of Art 370: Increasing alienation, relentless repression, simmering conflict

One year after the abrogation by the Central Government of Art. 370 in Kashmir, what is the situation in the Valley. Have the promises of peace, normalcy and development been realised? What is the current status in the Valley? Here is a detailed note by the People’s Union for Civil Liberties , “Jammu & Kashmir: One Year after Abrogation of Art. 370: Increasing Alienation, Relentless Repression, Simmering Conflict”:

Release of dabang neta: Rule of law can't be allowed to be slave to political rhetoric

By Vidya Bhushan Rawat*  When we look to politicians for solutions and politics as the 'final solution' for every evil then we are disappointed most of the time. In politics, we knowingly or unknowingly become part of the propaganda tool of the ruling elite which exists everywhere across different castes. We often provide issues and talk about them in binaries which suit our elites. The minorities among the marginalised who have no political space and representation rarely get heard by these majoritarian parties whose agenda remain power communities. Every political party in today's time is following the 'successful' formula of 'democracy' which is keeping the 'powerful' 'jaatis' with them leaving aside the marginalised one. The BJP started this but yes they cobbled together all other communities too through a diverse narrative.

Discussion on making school education meaningful to vulnerable communities

ActionAid note on workshop to boost National Curriculum Framework operations: *** Leading educationists and activists striving to make education meaningful to vulnerable communities gathered in Delhi to discuss the National Curriculum Framework for School Education (NCFSE). Acting in response to the call of the NCF Steering Committee appointed by the Ministry of Education, Government of India, ActionAid Association had organised the meeting to gather feedback on the draft NCFSE. This is part of ActionAid Association’s commitment to promote inclusive and gender-responsive education. The two-day national workshop titled ‘NCF Perspectives: Seeking Feedback on National Curriculum Framework (NCF)’ on May 30 and 31, 2023, was held at India International Centre, New Delhi. The workshop aimed to ensure a structured approach to gathering feedback from key stakeholders and enhancing their active participation in shaping the response sought by the Government of India. Stakeholders representing e

Why are 17 Indian cos, including Sterlite, blacklisted by Norway bank

By Venkatesh Nayak* Readers may recall the gory incidents that took place at Thoothukudi (Tuticorin) in Tamil Nadu in the southern part of India on 22 May, 2018. Thirteen protesters died on the spot when the police opened fire to disperse an assemblage of thousands of local residents and representatives of civil society groups. They were protesting against the adverse environmental impact of the industrial operations of Sterlite Copper which runs a copper smelter plant in the area. Accusations against the company have ranged from polluting local water resources to plans for expanding the installed capacity of the plant without the necessary environmental clearances. A ground report published in The Wire recently, mentions the decision taken by Norges Bank a few years ago to not invest funds from Norway’s Government Pension Fund Global (GPFG) in Sterlite “due to an unacceptable risk of complicity in current and future severe environmental damage and systematic human rights violations

J&K RTI activist denied opportunity to address audience, bring forward critical issues

Statement by Er. Irfan Banka, Founder of J&K RTI Foundation and convener of the Nalae Ferozpora Bachav Movement, regarding the incident of official misconduct during the My Town My Pride Jan Abhiyan Program and communication to Raj Bhavan: *** Er. Irfan Banka, a prominent RTI Activist and advocate, has come forward to address an incident of misconduct that occurred during the My Town My Pride Jan Abhiyan Program held at Mugam Town Hall in  Budgam. Additionally, Er. Irfan Banka has communicated the matter to Raj Bhavan, seeking appropriate action. During the event, Er. Irfan Banka was denied the opportunity to address the audience and bring forward critical issues concerning the people and services in the community, including waste management, traffic management, and the achievement of sustainable development goals. The incident involved the Additional Registrar Co-operative Kashmir, who not only prevented Er. Irfan Banka from speaking but also subjected him to public humiliation. E

Danger ahead: Smartphones making teens sexually smart, but mentally disturbed

By Harasankar Adhikari  We live in a digitally globalised society. Bombarded consumerism and imitation of foreign cultures and practises reshape our everyday lives. Life choices and lifestyles are the driving forces of modernity at present. People of almost all ages are within this realm and rhythm of consumerism for happiness.

Big challenge for environment movement: How to link with justice, peace movements?

By Bharat Dogra  The biggest hope for resolving life-threatening environmental problems of our planet increasingly rests now not with the world-level political leadership, which has failed miserably in many critical contexts, but instead with those highly committed environmental activists who have many significant achievements to their credit despite working in the middle of many difficulties. Alas, even they too are often grim today instead of being enthused because of the rather overwhelming conditions of world which force environment protection to go two steps backward even when the activists and movements achieve the difficult task of moving one step ahead.

Worship practice of Hindu religion in official functions should be considered appropriate

By NS Venkataraman* The new Indian parliament building was inaugurated with much fanfare, pomp and show by Prime Minister Modi befitting the occasion. While the magnificent building with several technological features was built in just over two years , the style and structure of the building has been acclaimed by millions of people who saw the inaugural programme. Those who saw this programme in person or in visual media could not miss the fact that the installation of Sengol ( Sceptre) was the hall mark of this elegant programme . In India, historically, Sengol is considered to be the symbol of justice and good governance.