Login

ECONOMETRICS

Program

Updated A.Y. 2018-2019

Overview

The main aim of this course is to provide students with the necessary analytical tools to apply microeconometric methods to the analysis of economic data. The course is organized in three modules. The first module (Single-equation linear models) will familiarize students with the workhorse in empirical economics, namely the estimation of the linear regression model by Ordinary Least Squares (OLS) and Instrumental Variables (IV) estimators. The second module (Systems of linear equations) will introduce students to the estimation of linear system of equations, emphasizing the modern approach to system instrumental variables estimation based on the Generalized Method of Moments (GMM). Finally, the third module (Linear Unobserved-Effects Panel Data Models) will cover the econometric analysis of static linear panel data models. At the end of the course students should be able to specify the appropriate econometric model for investigating the problem under study and draw proper conclusions based on the results.

This course is taught at a level assuming comfort with the course content in Mathematics (8011190) and Statistics (8010848).

Outline

Intro: The Structure of Economic Data

Single-Equation Linear Models:

  • Ordinary Least Squares (OLS) Estimation
  1. The OLS Method
  2. Mechanics and Interpretation of OLS
  3. Sampling Properties
  4. Hypothesis Testing
  5. Issues: Omitted Variables and Measurement error
  • Instrumental Variables (IV) Estimation
  1. ‚ÄčThe IV Method
  2. Multiple Instruments and Over-identified Models
  3. Asymptotics
  4. Pitfalls of IV: Weak Instruments
  5. Testing: Endogeneity and Over-identifying Restrictions
  6. Control Function Approach to Endogeneity
  • Estimation and Inference by Generalized Method of Moments

 

Systems of Linear Equations (optional):

  • Estimation and Inference by OLS
  • Estimation and Inference by Generalized Least Squares
  • The System IV estimator

 

Linear Unobserved-Effects Panel Data Models:

  • Assumptions: Covariates vs Unobserved-Effects and Idiosyncratic Errors
  • Estimation and Inference:
  1. Pooled OLS
  2. Fixed-Effects Estimation
  3. First-Differencing Estimation
  4. Random-Effects Estimation
  5. Comparison of estimators

 

References and material

  • Wooldridge J.M. (2010), Econometric Analysis of Cross-Section and Panel Data,  2nd ed., MIT Press, Cambridge (MA).
  • Wooldridge J.M. (2016), Introductory Econometrics: A Modern Approach, 6th ed., Cengage Learning.
  • Peracchi F. (2001), Econometrics, Wiley, Chichester (UK).

The main references are Wooldridge (2016) and Wooldridge (2010). They will be complemented by some chapters from Peracchi (2001). Lecture slides will be posted on the course web site. Suggestions for further reading will be provided in class.