Theory and Practice of Econometrics
Spring 2011
Jeffrey Parker
Course Information
Course Content
Class Format
Prerequisites
Office Hours
Exams and Other Assignments
Grading
Texts and Software
Course Content
Econometrics is the application of statistical techniques to the analysis of economic data. It has its basis in pure mathematical statistics, but has developed as a distinct branch of the parent subject in order to serve particular data-analysis needs often faced by economists. The best (perhaps the only) way to learn econometrics is to do econometrics. This course will emphasize hands-on application of econometric techniques with natural data, not textbook proofs of statistical theorems. Some attention will be paid to the nature and sources of economic data. The principal mission of this course is to provide students with a set of econometric tools that can be applied as needed in economic research.
Class Format
This class meets for a total of four hours per week, 12-1pm on Mondays, Wednesdays, Thursdays, and Fridays. Most weeks, about three of those hours will be a lecture/conference session that will examine econometric techniques and their applications. The remaining time will usually include discussion of the weekly assignments or other econometric applications.
Prerequisites
Economics: The only economics prerequisite is Econ 201. In
practice, the more economics you have taken, the more applications of
econometrics you will recognize as we proceed through the course.
Mathematics:
Math 141 or equivalent background in statistical analysis is an
important prerequisite. Students will be expected to have a working
understanding of basic statistics, including the concepts of
probability distributions, expected value and variance, estimators,
unbiasedness, hypothesis tests, and confidence intervals. A very brief
review of these topics is conducted January 26-28 for those whose
background in statistics may be limited or rusty. Matrix and vector
notation will also be used in class at times. If there are sufficient
students with no knowledge of matrix methods, one or more sessions may
be organized through the Quantitative Skills Center during the first
two weeks of the semester.
Office Hours
The instructor will hold office hours in Vollum 229 on Mondays and Wednesdays from 1:30 to 3:00. Students for whom these hours are inconvenient may make appointments at other times by contacting the instructor at extension 7308 or by email to parker@reed.edu.
Exams and Other Assignments
Exams: There will be a mid-term exam and a comprehensive
final exam. Both exams may have in-class and/or take-home parts. There
will be no term paper for the course, though there will be a final
project as discussed below.
Weekly problems: Many
weeks there will a set of theoretical problems due in class on Friday
mornings. These assignments do not usually involve any estimation and
are to be done individually.
Weekly econometric projects:
An applied project using statistical software to estimate models will
be assigned most weeks. Detailed information about assignments will be
posted weekly on the Web site. The weekly econometric projects will
usually be done by teams of two students, who jointly submit a single
collaborative report. Past experience suggests that teams who work
together on the projects produce better results than those who divide
the work and do the parts individually. However your team decides to
work, both members of the team must participate in both the econometric
estimation and the writing of the report, and if there are multiple problems assigned both partners must participate on each problem. Both must "sign-off" on the
final product. The instructor will assign teams; you
will generally work with a different partner each week. Reports are to
be submitted electronically by email no later than 6:00am on Tuesdays.
The instructor will read the reports and send email comments to each
student. We will often devote some class time to discussion of the projects either when they are assigned or after they have been completed.
Because of the short turnaround time between the submission deadline
and the class discussion, late work will be severely penalized.
Projects received between 6:00am Tuesday and 6:00am on Wednesday will
receive half credit. Projects more than 24 hours late will not be
accepted.
Final Project: We will undertake a final project during the second half of the semester.
The projects will be
announced after spring break and students will choose their
groups and topics from among a set offered by the instructor (or proposed by students). As
the semester progresses, groups should think about how the various
econometric methods we study could be applied to their projects. Some
preliminary analysis on the final project, such as data collection and
cleaning, may be done during the semester as well. During the last two
weeks of the semester, work on the final project will replace the
weekly project assignments and groups will work intensively together to
complete their analyses. The outcome of the analysis will be presented
in a written report and an oral presentation during final exam week.
Grading
Grades will be based on all information the instructor has about your level of understanding of econometrics. This includes evidence from exams, homework, projects, class participation, and individual discussions.
Texts and Software
Text: The main text for this course is R. Carter Hill, William E. Griffiths, and Guay C. Lim's Principles of Econometrics, 4th ed. (HGL). This is a brand-new edition of a modern text
that covers recent developments in econometrics. It has
extensive examples of applications and good problems, both theoretical
and applied. Students will be expected to have unlimited access to this
book, which is available in the Reed Bookstore. A couple of copies will
be on reserve. Datasets referred to in the text (and used in the
examples and problems) are available from the publisher's Web site.
Other Texts: There are several econometrics textbooks on reserve. Some of these are less mathematical
than HGL; others are more rigorous. Most sections of the
reading list have references to relevant sections of these texts that
cover the same topic. There will be some required reading assignments
from these alternative texts, but most of the time you are simply
encouraged to explore these texts if you find that our presentation is
inappropriately easy or difficult.
Applied Assignments: Most applied assignments will be taken from the applied problems in the HGL text. In addition, some may be taken from Ernst Berndt's The Practice of Econometrics, which is a unique book. It offers chapters covering ten applied areas of econometrics. Each chapter surveys several important empirical studies in the area, then presents a series of empirical assignments (with the requisite data) in which you may replicate or extend the studies.
Software: Students will use the statistical package Stata for most course assignments. This software is available on the computers in the IRCs and the PPW. If you are interested in having your own copy of Stata for either PC or Mac, you may purchase a one-year student license to the full version of Intercooled Stata 11 for $98.00 from http://www.stata.com/coursegp.html. (The GradPlan ID is JPE11.) A full set of Stata manuals is on reserve in the library.