ECMT2150 Intermediate Econometrics
Intermediate Econometrics
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ECMT2150
Intermediate Econometrics
Week 1
• Unit Overview
• See also the unit outline online
• Additional helpful info posted on our Canvas site
• Introduction to Econometrics
• Reference: Wooldridge Chapters 1 & 2
Unit Overview
What to expect from me?
• It’s wonderful to be teaching this unit – My goal is
to encourage many of you to:
• Think about a career as an economist (public or private)
• Develop an interest in learning more about the theory
and application of econometrics
What to expect from me - Logistics
• Lecture slides will generally be available on Monday
• I will try to respond to emails within 1-2 days (I teach
another course)
• Please use the Ed discussion board:
• Ask and discuss content questions there
• Can ask admin questions there too
• Please CHECK THERE & on the ANNOUNCEMENTS page FIRST
before emailing the teaching team. Especially if it’s an admin
question
Textbook
•Required:
Introductory Econometrics: A Modern
Approach, by J.M. Wooldridge 6th or 7th Ed.
Publisher (Cengage) discount code: WOW10
Other textbooks
• If you want extra reading, the following textbooks
are recommended:
• Microeconometrics Using Stata, by Cameron &
Trivedi, Stata Press, 2010
• Mostly Harmless Econometrics: An Empiricist's
Companion, by Angrist and Pischke, Princeton
University Press, 2008
• Mastering ‘Metrics: The Path from Cause to Effect, by
Angrist and Pischke, Princeton University Press, 2015
• Microeconometrics: Methods and Applications, by
Cameron & Trivedi, Cambridge University Press, 2005
Canvas and Ed
• Canvas
• Announcements
• Lecture Slides
• Tutorial Questions and Solutions
• Assignment
• Practice exam questions
• Marks (incl Quizzes)
• Please check Canvas regularly – at least 1-2 times every
week
• Ed
• Use and check the Ed discussion board regularly
Lectures and Tutorials
• Attend the lectures week by week
• Support your learning with
• Textbook & Lecture slides
• Read the assigned chapters and lecture notes before attending
• Tutorials
• Questions? consultation hours, Ed
• Attend your tutorial sessions!
• Tutorials will help you understand the materials covered in lectures
• Each week, tutorials will work on the same topic as the lecture for that week
• Tutorial questions will be posted the week before the tutorial
• Attempt to solve the questions before the tutorial so that you can follow the tutor
efficiently and get the most out of your tutorial time
Remember that learning economics (econometrics) is like learning to swim … you can’t
do it from the sidelines. You have to jump in the water. Try to be an active learner!
Tutorials and Tutors
• Unit Tutors:
Felipe Pelaio, Mingdi Chen, Longye Tian
• Tutorials:
• See your personal timetable for your tutorial times and locations
• Tutorials start this week (week 1)! This is an opportunity to get
help with (i.e. review) the important mathematical and statistical
tools used in the Unit (see Appendices A – C)
• Office hours – see Canvas for times and venues
STATA and Practical Data Analysis
STATA
• Students enrolled in this course can access a copy of STAT18 to install on your
own PC for use during the semester:
• To access STATA, please follow the instructions below:
• Navigate to STATA student licence request form:
https://forms.office.com/r/rsGzwA0RV4
• Log in using your university student account credentials.
• Enter you student ID and review the licence agreement.
• Submit the form.
• After you have submitted the form successfully, please stay on the
webpage, which will display instructions to download, installation, and
licencing.
STATA and Practical Data Analysis
STATA
• Getting help:
• STATA has very good help facilities. Lots of free online
guides to STATA are available on the STATA website:
https://www.stata.com/support/
• UCLA maintains an excellent website with lots of helpful
tutorials: https://stats.idre.ucla.edu/stata/
• Your tutors are also adept at using STATA so ask them for
help in tutorials or consultation times
• Post a question on Ed (you can do this anonymously)
Assessment
• For Special Consideration/Arrangement etc., check the UoS
Outline and see also University and Faculty Policies
TASK Weight Due date
Quizzes (5) 10% Each quiz will be available
from Mon 9AM – Sun
11:59PM of that week
Weeks:
4,6,9,11,
13
In-Semester
Exam
25% Wed, 20 Sep, 10:00AM Week 8
Assignment 15% Sun, 29 Oct, 11:59PM Week 12
Final Exam 50% Exam period
Quizzes
• There are 5 MCQ quizzes with 6 questions each
• Occur in weeks 4, 6, 9, 11 and 13
• Quizzes will be made available on the external
website: http://www.mcempirics.com/
• Use invitation to register on this website with your
USyd email address ([email protected])
• Each quiz open for 1 week but once you start only
have 60 minutes to complete it
In-Semester Exam
• Short-release assignment
• Exam comprising two parts: MCQ, short-answer
and questions requiring you to do STATA-based
computations
• Part 1 will involve MCQ and short-answer type
questions (60 minutes)
• Part 2 will require you to download a dataset and
answer questions using STATA (24 hours)
• Cover concepts from weeks 1-7
The University of Sydney Page 16
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Disability Services Office
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02-8627-8422
Topics and Schedule
Week Topics & Assessments Readings
1 Introduction to Econometrics & Some Concepts in Probability and StatisticsTutorials are on this week Chs 1 & 2, Appendix A,B & C
2 Simple and Multiple Linear Regression – Assumptions and Properties Chs 2 (2.1-2.4), 3 (3.1-3.2) & 6 (6.1-6.3)
3 Multiple Linear Regression – Further Properties
Chs 2 (2.3,2.5), 3 (3.3, 3.4) & 4
(4.1)
4 Inference in Linear Regression ModelsQuiz 1 Ch 4
5 Asymptotic Properties of the Linear Regression Model and Using Qualitative Data Chs 5 & 7 (7.1-7.5)
6 Specification Issues in Linear Regression ModelsQuiz 2 Chs 3 (3.3,3.4) & 9 (9.2)
7 Further Specification Issues in Linear Regression Models Ch 9 (9.1, 9.4-9.6)
8 In-Semester Exam (no lecture, but tutorials still on!)
Mid Semester Break
9 Heteroskedasticity and Introduction to GLSQuiz 3 Ch 8
10 Endogeneity and Instrumental Variables Chs 9 (9.4) & 15
11 Instrumental Variables – Further IssuesQuiz 4 Ch 15
12 Introduction to Panel Data MethodsAssignment is due Sunday 29 Oct at 11:59PM Chs 13 & 14 (mostly 13)
13 Further Topics in Panel Data Models and Review Chs 13 & 14 (mostly 14)
The Nature of Econometrics and Economic
Data
Reference: Chapter 1
The Nature of Econometrics
• What is econometrics?
• Econometrics => use of statistical methods to analyse economic data
• Econometricians typically analyse nonexperimental (i.e. observational) data
• Typical goals of econometric analysis
• Estimating relationships between economic variables
• Testing economic theories and hypotheses
• Predicting economic variables
• Evaluating and implementing government and business policy
Ask yourself why? What differs between the natural sciences and a social
science like economics?
1. Decide the topic and propose an economic model (theory)
2. Propose a corresponding econometric (or empirical) model,
which typically involves some unknown parameters
3. Collect appropriate data
4. Using some software, estimate the model (i.e. parameters)
from the data
5. Give economic interpretation to the estimation results
Steps in Econometric Analysis
Economic models
• Can be models of microeconomic (e.g. individuals or firms) or
macroeconomic (e.g. regions, countries) behaviour
• Can be formal (i.e. derived from first principles), informal (i.e.
conceptual frameworks based on economic understanding), or
atheoretical (i.e. based on intuition)
• Often use optimising behaviour, equilibrium modeling
• Establish relationships between economic variables
“Essentially, all models are wrong, but some are useful”
(Box, G. E. P., and Draper, N. R., (1987), Empirical Model Building and Response Surfaces, John Wiley & Sons, New York, NY p. 424.)
Econometrics vs Economics
• Economics suggests important relationships, often with
policy implications, but virtually never suggests quantitative
magnitudes (i.e. size) of causal effects:
• What is the quantitative effect of reducing class size on student
achievement?
• How does a bachelor’s degree change earnings?
• What is the price elasticity of cigarettes?
• What is the effect on output growth of a 1 percentage point increase
in the cash rate by the RBA?
• What is the effect on housing prices of changes to zoning laws?
The applied economist uses econometrics to get the best estimate of
the economic relationship being investigated. The econometrician
develops the tools (i.e. methods) applied economists use
• Becker (1968) Derives equation for criminal activity based on utility
maximization ... What determines amount of criminal activity?
• The functional form of relationship not specified because it depends on the
utility function which is not known
• We cannot estimate this relationship as is ... we will need to specify an
econometric model