INTRODUCTION TO ECONOMETRICS
Economics 490
Spring 2008

Web address: http://econ.la.psu.edu/~jtybout/490syl_s08.html

Instructor: Professor James Tybout
Location:  517 Kern Graduate Building
e-mail:                    jxt32@psu.edu
Office hours:        Tuesdays 1:30-2:30
Wednesdays 4:00-5:00
and by appointment

Teaching Assistant:  Qiong Yang
Location:             407 Kern Graduate Building

e-mail:                 quy101@psu.edu
Office Hours:        1:00-2:00 and 5:00-6:00 Wednesdays

Course content and mechanics

This course provides an introduction to the empirical analysis of single equation and two-equation economic models. Grades will be based upon 2 midterms worth 100 points each, problem sets worth 100 points combined, a term project worth 50 points, and a comprehensive final worth 150 points. Homework problems will be assigned and collected weekly. Each assignment will be linked to this page one week prior to their due date; answer keys will also be linked after the assignments are collected.

On the afternoon before each class meeting, lecture notes will be linked to the relevant entry in the course outline below. Students are responsible for printing these notes out and bringing them with them to class.

Prerequisites

All students are required to have taken ECON 390 or its equivalent prior to enrollment. Elementary calculus will also be used occasionally.

Missed exams

There will be no make-up exams. Those who miss a midterm exam without a valid excuse will receive a zero for that exam. Those who miss an exam but document a valid excuse for their absence will receive a course grade based on their remaining course work. The Economics Department position on valid excuses is as follows:

During the course many possible situations may arise that would result in your inability to attend class, attend exams, or perform at a minimally acceptable level during an examination. Illness or injury, family emergencies, certain University-approved curricular and extra-curricular activities, and religious holidays can be legitimate reasons to miss class or to be excused from a scheduled examination. 

In the case of your own illness or injury, confirmation from a physician, physician’s assistant, a nurse-practitioner, or a nurse is required. Be advised that University Health Services cannot provide such verification unless they have provided treatment and the student authorizes release of information to the instructor. Further, barring extraordinary circumstances, the confirmation must be available to the instructor prior to the missed course event. 

With regard to family emergencies, you must provide verifiable documentation of the emergency. Given the vast array of family emergencies the instructor will provide precise guidance as to what constitutes adequate documentation. Unless the emergency is critical you should notify the instructor in advance of your absence from the scheduled course event. In cases of critical emergencies, you must notify the instructor within one week of your absence.

For University-approved curricular and extra-curricular activities, verifiable documentation is also required. The student should obtain from the unit or department sponsoring the activity a letter (or class absence form) indicating the anticipated absence(s). The letter must be presented to the instructor at least one week prior to the first absence. 

In the case of religious holidays, the student should notify the instructor by the third week of the course of any potential conflicts.

Readings and software

The text for this course is: Introduction to Econometrics (2^nd Edition), by James Stock and Mark Watson (Pearson/Addison-Wesley, 2007). The course will also make use of a statistical software package, STATA, which is accessible in all of the PSU computer labs. Keep in mind that the University’s STATA license only allows 20 simultaneous users, so you may have trouble getting on if you wait until the last minute to do your homework. (Students who wish to work on their own machines can purchase their own copies of STATA, but it costs $380.) Data sets used in the text--both for examples and for exercises--can downloaded free from the text web site: http://www.aw-bc.com/stock_watson .

Academic Integrity

Penn State defines academic integrity as the pursuit of scholarly activity in an open, honest and responsible manner. All students should act with personal integrity, respect for other students' dignity, rights and property, and help create and maintain an environment in which all can succeed through the fruits of their efforts (Faculty Senate Policy 49-20).

Dishonesty of any kind will not be tolerated in this course. Dishonesty includes, but is not limited to, cheating, plagiarizing, fabricating information or citations, facilitating acts of academic dishonesty by others, having unauthorized possession of examinations, submitting work of another person or work previously used without informing the instructor, or tampering with the academic work of other students. Students who are found to be dishonest will receive academic sanctions and will be reported to the University's Judicial Affairs office for possible further disciplinary sanction.

For further details on Penn State policies concerning academic integrity, please refer to: University policies on academic integrity.

Disability Access

The Pennsylvania State University encourages qualified people with disabilities to participate in its programs and activities and is committed to the policy that all people shall have equal access to programs, facility, and admissions without regards to personal characteristics not related to ability, performance, or qualifications as determined by University policy or by state or federal authorities. If you anticipate needing any kind of accommodation in this course or have questions about physical access, please tell the instructor as soon as possible. 

Homework Assignments

To be posted

Previous exams and extra practice problems

To be posted

Announcements

To be posted

COURSE OUTLINE

I. Introduction and Review

a. Methodology of empirical economics (Chapter 1 and Section 4.1)

b. Review of statistical tools (Chapters 2 and 3)

II. Bivariate Regression Models

a. Estimation: ordinary least squares (Sections 4.2 and 4.3; Appendix 4.2)   

b. Statistical properties of OLS estimators (Sections 4.4 through 4.6; Appendix 4.3) 

c. Introduction to STATA Notes on using STATA

III. Inference with the Bivariate Model

a. Confidence intervals (Section 5.2

b. Simple hypothesis testing (Section 5.1)

c. Heteroskedasticity (Section 5.4)

d. The Gauss-Markov theorem (Section 5.5 and Appendix 5.2)

Exam one:  Thursday, February 21

IV. Multiple Regression

a. Generalizing the linear model (Sections 6.1 through 6.3)

c. Multicolinearity (Section 6.7)

b. Statistical properties of multiple regression (Sections 6.5 and 6.6)

d. Adjusted-R² (Section 6.4)

e. Dummy variables (Section 5.3)

V. Inference with Multiple Regression Models

a. Simple hypothesis tests and confidence intervals (Sections 7.1)

b. Joint hypothesis tests (Sections 7.2 and 7.3)

VI. Some Specification Issues

a. Non-linear relationships (Chapter 8)
b. Units of measurement
c. Dealing with specification problems (Sections 7.5-7.6, Chapter 9)
d. External validity (Chapter 9)

VII. Qualitative Response Models 

a. Limitations of the linear model (Section 11.1)
b. Logit and probit models (Sections 11.2 through 11.5)

Exam two:  Thursday April 3

VIII. Instrumental Variables 

a. The notion of instruments (Section 12.1)
b. The general IV regression model (Section 12.2)

c. Issues and examples (Sections 12.3-12.6)

X. Panel Data   

a. Overview (Sections 10.1 and 10.2)
b. Fixed effects (Sections 10.3, 10.4 and 10.5)
c. Applications (Sections 10.6)

IX. Time Series Modeling   

a. Overview of times series data and serial correlation (Sections 14.1 and 14.2)
b. Autoregressive models and dynamic causal relationship (Sections 14.3, 14.4, 15.1-15.3)
c. Trends and stationarity (Section 14.5 and 14.6)
d. Co-integration (Sections 16.1-16.4)

Final exam: To be announced