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Elasticities and the Inverse Hyperbolic Sine Transformation

Elasticities and the Inverse Hyperbolic Sine Transformation Applied econometricians frequently apply the inverse hyperbolic sine (or arcsinh) transformation to a variable because it approximates the natural logarithm of that variable and allows retaining zero‐valued observations. We provide derivations of elasticities in common applications of the inverse hyperbolic sine transformation and show empirically that the difference in elasticities driven by ad hoc transformations can be substantial. We conclude by offering practical guidance for applied researchers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Oxford Bulletin of Economics & Statistics Wiley

Elasticities and the Inverse Hyperbolic Sine Transformation

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References (20)

Publisher
Wiley
Copyright
Copyright © 2020 The Department of Economics, University of Oxford and John Wiley & Sons Ltd
ISSN
0305-9049
eISSN
1468-0084
DOI
10.1111/obes.12325
Publisher site
See Article on Publisher Site

Abstract

Applied econometricians frequently apply the inverse hyperbolic sine (or arcsinh) transformation to a variable because it approximates the natural logarithm of that variable and allows retaining zero‐valued observations. We provide derivations of elasticities in common applications of the inverse hyperbolic sine transformation and show empirically that the difference in elasticities driven by ad hoc transformations can be substantial. We conclude by offering practical guidance for applied researchers.

Journal

Oxford Bulletin of Economics & StatisticsWiley

Published: Feb 1, 2020

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