ECON 589:
Topics in Advanced Econometrics (Fall 1999)

Instructor: Prof. Herman J. Bierens

Office hours: Wednesday 2-4 pm (Kern 510), or by appointment.

Time and place: Tuesday-Thursday 9:45-11 am, 413 Kern

This course has two parts, each counting for 50%:

• Part 1

  Part 1 of this course covers the following advanced topics in time series econometrics and empirical macroeconomics:

  • VAR innovation response analysis (including structural VAR models),
  • Unit roots,
  • Spurious regression,
  • Cointegration,
  on the basis of lecture notes, selected published articles, and corresponding material in Hamilton's textbook. The presentation will alternate between econometric theory and applications. The latter will be conducted in class using my econometrics software package EasyReg.

  There will be no exams over this part: 50% of the grade will be determined on the basis of an empirical term paper. You have to collect or find multiple time series data, test for unit roots, cointegration, and/or conduct VAR innovation response analysis, and write a term paper of about 15 pages. In this term paper you have to motivate your choice of data and topic, discuss where your research fits in the literature, report your results, and draw your conclusions. This project should not take more than one week. The term paper has to be turned in on or before the final exam date.

  Recommended textbook for Part 1:

  Hamilton (1994), Time Series Analysis, Princeton University Press

• Part 2

  The actual contents of part 2 will be determined in consultation with the students. The following topics are only suggestions.

  1. Further topics in advanced time series analysis:
     1. Conditioning on infinitely many random variables. [B4, Ch.6, pp. 1-5]
     2. Functional specification of time series models. [B4, Ch.7, pp. 1-7]
     3. ARMAX modelling [B4, Ch.8; BB]
     4. ARMA Memory Index Modelling [B4, Ch. 7]
     5. Nonlinear co-trending analysis [B5]
  2. Nonparametric regression: [B4, Ch.10, pp.1-42; BP; B2]
  3. GMM estimators: [B4, Ch.5; HA]
  4. Applications of maximim likelihood methods:
     1. Concentrating the likelihood function [CR, Ch.5, pp.59-62]
     2. Generalized classical regression, SURE and GLS [CR, Ch.6-7, pp. 79-108]
     3. Discrete choice models [CR, Ch. 10, pp.150-171]
     4. Limited dependent variables models [CR, Ch. 11; AM]
     5. Duration models [CR, Ch. 12, pp. 186-193]
  5. Integrated conditional moment tests of functional form [B4, Ch.3; BP2; DJ; B1; B3]
  6. or any other econometric topic you want to know more about.

  There will be no formal exams over part 2 as well. Since the purpose of this course is to enable the students to read, understand, and apply the newest developments in theoretical and empirical econometrics, each student has to choose a few econometric articles, and write a second term paper in which these articles are discussed and explained. This second term papers counts for the other 50% of the grade. It should not take more than one week. Also the second term paper has to be turned in on or before the final exam date.

  References:

  [AM]

  Amemiya (1981): "Qualitative Response Models: A Survey", Journal of Economic Literature XIX, 1483-1536

  [B1]

  Bierens (1982): "Consistent Model Specification Tests", Journal of Econometrics 20, 105-134.

  [B2]

  Bierens (1987): "Kernel Estimators of Regression Functions", in: Truman F.Bewley (ed.), Advances in Econometrics: Fifth World Congress, Vol.I, New York: Cambridge University Press, 99-144.

  [B3]

  Bierens (1990): "A Consistent Conditional Moment Test of Functional Form", Econometrica 58, 1443-1458.

  [B4]

  Bierens, H.J. (1994): Topics in Advanced Econometrics, Cambridge University Press (Paperback)

  [B5]

  Bierens, H.J. (1999): Nonparametric nonlinear co-trending analysis, with an application to interest and inflation in the US. (Working paper)

  [BB]

  Bierens, H.J., and L. Broersma (1993): "The relation between unemployment and interest rate: some international evidence", Econometric Reviews 12, 217-256.

  [BP1]

  Bierens, H.J., and H. Pott-Buter (1990): "Specification of Household Engel Curves by Nonparametric Regression", Econometric Reviews 9, 123-184

  [BP2]

  Bierens, H.J., and W.Ploberger (1997), "Asymptotic Theory of Integrated Conditional Moment Tests", Econometrica 65, 1129-1152

  [CR]

  Cramer, J.S. (1986): Econometric Applications of Maximum Likelihood Methods, Cambridge University Press (Out of print, but I have the permission of the author to distribute photocopies of parts of this book)

  [DJ]

  De Jong (1996), "The Bierens test under data dependence", Journal of Econometrics 72, 1-32.

  [HA]

  Hansen (1982): "Large Sample Properties of Generalized Method of Moments Estimators", Econometrica 50, 1029-1054

Disability Message:

The Pennsylvania State University encourages qualified persons with disabilities to participate in its programs and activities. If you anticipate needing any type of accommodation in this course or have questions about physical access, please tell the instructor as soon as possible.

Download lecture notes

• Vector time series and innovation response analysis.
• Unit roots.
• Spurious regression.
• Cointegration.