Term 4 2007-2008
Office: 201 College Hall
Telephone: 895-4208 (voice mail)
Class Times: 9:15-11:15 Monday -Friday
1:00-2:00 Monday – Thursday TBD
Office Hours: 11:15-12:00 Monday-Friday and by appointment
Required Texts: Ramu Ramanathan, “Introductory Econometrics with Applications.”
“Persons pretending to forecast the future shall be considered disorderly under subdivision 3, section 901 of the criminal code and liable to a fine of $250 and/or six months in prison.”
-- Section 889, New York State Code of Criminal Procedure
Econometrics deals with the application of statistical methods in order to test economic theory. More broadly, it is concerned with:
(1) estimating economic models,
(2) confronting economic theory with facts and testing hypotheses,
(3) forecasting the future behavior of economic variables (which puts you in danger of being prosecuted under Section 889 if you do it in New York!).
Econometrics is an important part of applying economics to the real world. In fact, econometrics is the most common way that economics is used on a day-to-day basis. Chances are that if in the future you get a job in which economics is directly applicable, a great deal of what you will be doing will involve econometrics.
Econometrics is often perceived among students as being “useful” but “boring”. I think that this is because the econometrics that is taught in the classroom often focuses on the “why” questions, meaning that the primary focus is on developing the theory of using statistics in economics and using elaborate arguments to prove this theory.
In contrast, the focus of this class will be on the “how” and not the “why”. We will try to stay away from complex statistical proofs and instead focus on how econometrics can be used to get meaningful results that provide useful data and which can be used to support or raise questions about existing economic theory. By focusing on the “how” questions, our goal will be to develop some tools, especially computer skills, that students can use outside of the classroom, in future jobs, or in other disciplines.
Class Format: I plan on using class time in the following manner. The morning sessions will primarily consist of lecturing from our main textbook. The afternoon sessions will primarily be used for computer lab sessions.
Grading: Course grades will be determined by four classes of assignments:
(1) Homework (30%): A series of approximately 5-6 homework assignments will be given throughout the term. These homeworks will partially consist of computer assignments which will allow students to directly apply class material to some real world examples.
(2) Paper (30%): An empirical study of each student’s choosing will be required. This paper should consistent of a complete empirical investigation of an economic topic and should consist of the following sections:
(1) Introduction and an explanation of the economic model to be tested.
(2) An explanation of the data used in the study.
(3) Estimation of the basic model and discussion of potential problems.
(4) Hypothesis tests and an investigation of the robustness of the model.
(5) Interpretation of the results and conclusions.
The best papers will be those that most completely and fully evaluate a plausible economic model using the econometric techniques developed in class. The paper should be approximately 7-10 pages in length (excluding computer printouts and data).
While a literature review is not part of this paper, students are expected to identify at least two published research papers on similar or related topics to the one that they are investigating. EconLit, which is available at the library, is an excellent place to begin looking for these papers.
In addition, students will be required to present a brief 20-30 minute discussion of their research with their fellow classmates in class.
(3) Final Exam (30%): One comprehensive exam will be given on the last day of class.
(4) Class Participation (10%): Credit for class participation will be based on both quantity and quality on content. If you miss a class it is your responsibility to find out what announcements and other materials or assignments were presented in class.
General economic data is available from many different sources on the web. Here are some places to begin:
Notes: Academic dishonesty will not be tolerated and will be dealt with in the harshest manner that is still in accordance with Cornell’s regulations in the student handbook. Academic dishonesty can include the failure to properly document sources of information used in your work.
OUTLINE OF TOPICS AND READINGS
Also, additional articles and topical readings will be assigned throughout the term.
Section 1: Introduction and Review of Basic Statistics
Monday #1: Introduction R: Chapter 1
Tuesday #1: Review of Statistics R: Chapter 2
Wednesday #1: Review of Stats, cont.
Section 2: Ordinary Least Squares Estimation
Thursday #1: Simple Regression Model R: Chapter 3
Friday #1: Simple Model, cont.
Monday #2: Multiple Regression Model R: Chapter 4
Tuesday #2: Multiple Model, cont.
Wednesday #2: Multicollinearity R: Chapter 5
Section 3: Problems with Specifying Economic Models
Thursday #2: Model Specification R: Chapter 6
Friday #2: Model Specification, cont.
Monday #3: Dummy Variables R: Chapter 7
Section 4: Violations of Ordinary Least Squares Assumptions
Tuesday #3: Heteroscedasticity R: Chapter 8
Wednesday #3: Serial Correlation R: Chapter 9
Thursday #3: Serial Correlation, cont.
Friday #3: Simultaneous Equations R: Chapter 13
Monday #4 Classroom Presentations
Tuesday #4: Classroom Presentations/
Wednesday #4: FINAL EXAM