INTRODUCTION TO ECONOMETRICS
Economics 490
Spring 2007
Instructor: Professor James Tybout
Location: 517
e-mail: jxt32@psu.edu
Office hours: Tuesdays 1:30-2:30
Wednesdays 2:30-3:30
and by appointment
Teaching Assistant: Sehwan Bae
Location: 505
e-mail: sxb969@psu.edu
Office Hours: Wednesday 3:30-5:30
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, 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.
The text for this course is: Introduction
to Econometrics (2nd
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
The ability of
the University to achieve its purposes depends upon the quality and integrity
of the academic work that its faculty, staff and students perform. Academic
freedom can flourish only in a community of scholars which recognizes that
intellectual integrity, with its accompanying rights and responsibilities, lies
at the heart of its mission. Observing basic honesty in one's work, words,
ideas, and actions is a principle to which all members of the community are
required to subscribe.
All course work
by students is to be done on an individual basis unless an instructor clearly
states that an alternative is acceptable. Any reference materials used in the
preparation of any assignment must be explicitly cited. In an examination
setting, unless the instructor gives explicit prior instructions to the
contrary, whether the examination is in-class or take-home, violations of
academic integrity shall consist of any attempt to receive assistance from
written or printed aids, or from any person or papers or electronic devices, or
of any attempt to give assistance, whether the one so doing has completed his
or her own work or not. Other violations include, but are not limited to, any
attempt to gain an unfair advantage in regard to an examination, such as
tampering with a graded exam or claiming another's work to be one's own.
Violations shall
also consist of obtaining or attempting to obtain, previous to any
examinations, copies of the examination papers or the questions to appear thereon,
or to obtain any illegal knowledge of these questions. Lying to the instructor
or purposely misleading any
In cases of a
violation of academic integrity it is the policy of the Department of Economics
to impose the most severe penalties that are consistent with University
guidelines. For further details on
Disability Access
The
Homework Assignments
Assignment 1 (due January
30—note revised date) Solutions, assignment
1
Assignment 2 (due
February 8) Solutions,
assignment 2
Assignment 3 (due
February 15) Solutions, assignment 3
Assignment 4 (due
March 8) Solutions,
assignment 4
Assignment 5 (due
March 29) Solutions,
assignment 5
Assignment 6 (due
April 12) Solutions,
assignment 6
Assignment 7 (due
April 19) Solutions,
assignment 7
Assignment 8 (due
April 26) Solutions,
assignment 8
Previous exams and
extra practice problems
Midterm 1, fall 2001 , Answers to fall 2001 midterm 1
Practice problems on CIs, Answers to practice problems on CIs
Midterm 1, spring 2007, with answers
Midterm 2, fall 2001 , Answers to fall 2001 midterm 2
Practice problems for second midterm Answers to practice problems for second midterm
Midterm 2, spring
2007, with answers
Assignment
9 (for practice only), Solutions, assignment
9
Announcements
Review session: Monday, April 2,
4:40 PM, Rackley 104
Review session: Tuesday, May 8,
5:00 PM, Rackley 104
Final Exam: Thursday, May 10, 4:40-6:30, Rackley
104
COURSE OUTLINE
I. Introduction and Review
a. Methodology of empirical economics (Chapter 1 and Section 4.1) (lecture 1)
b. Review of statistical tools (Chapter 2) (lecture 2, lecture 3, lecture 4)
II. Bivariate Regression Models
a. Estimation: ordinary least squares (Sections 4.2 and 4.3; Appendix 4.2) (lecture 5, lecture 6, lecture 7)
b. Statistical properties of OLS estimators (Sections 4.4 through 4.6;
Appendix 4.3) (lecture 8)
c. Introduction to STATA
III. Inference
with the Bivariate Model
a. Confidence intervals (Section 5.2) (lecture 9, lecture 10)
b. Simple hypothesis
testing (Section 5.1) ( lecture 11, lecture 12)
c. Heteroskedasticity (Section 5.4) (lecture 13)
d. The Gauss-Markov theorem
(Section 5.5 and Appendix 5.2) (lecture 14)
Exam one: February 22
V. Inference
with Multiple Regression Models
a. Simple hypothesis tests and
confidence intervals (Sections 7.1)
d. Adjusted-R2
revisited (Section 7.5)
VI. Some
Specification Issues
a. Non-linear relationships (Chapter 8) (lecture 19)
b. Units of measurement (lecture 20)
c. Dealing with specification
problems (Chapter 9) (lecture 21)
d. External validity (Chapter 9)
VII. Qualitative
Response Models
a. Limitations of the linear model (Section 11.1) (lecture 22)
b. Logit
and probit models (Sections 11.2 through 11.5) (lecture 23)
Exam two: April 3
VIII. Instrumental
Variables
a. The notion of instruments (Section 12.1) (lecture 24)
b. The general IV regression
model (Section 12.2)
c. Issues and examples (Sections 12.3-12.6)
IX. Time
Series Modeling
a. Overview of times series data and serial correlation (Sections 14.1 and
14.2) (lecture 25)
b. Autoregressive models
(Sections 14.3 and 14.4) (lecture 26)
c. Trends and stationarity (Section 14.5 and 14.6) (lecture 27)
d. Dynamic causal relationships
(Sections 15.1-15.3)
e. Co-integration (Sections 16.1-16.4)
Final exam: Thursday, May 10, 4:40-6:30, 104 Rackley