Econometrics Economics 345

David M. Levy 7 Carow Hall Tu / Weds 1-2p Virtual Office: DavidMLevy@gmail.com Course Goal We shall attempt to look upon econometrics as something practiced by optimizing agents. Instead of assuming that the goal of estimation is to best contribute to public knowledge, we shall assume that the goal of estimation is to best contribute to private well-being. This requires that we consider econometric estimation as a choice. This, of course, requires that econometrician has more than one estimate feasible. Thus, it is important to look into what is a feasible estimate. With all the interest in how statistical ratings turned out so badly, it is worthwhile to think about estimation in terms of choice. Major tools Computer simulation of estimating & hypothesis testing in Shazam. On-line journals in econometrics. Use of the Library of Congress. Texts Ashenfelter, Levine & Zimmerman Statistics & Econometrics, New York, 2003. Mosteller & Tukey Data Analysis and Regression, Reading, MA 1977. Shazam web site [The Shazam copy is gratis. It has a fine manual in PDF form.] Grades 1) Weekly problem sets. These will be sent out by email before class. It is really important that I have a working email address for you. The homework is due the following week. (100 points). 2) Take-home midterm exam (100 points); 3) In-class midterm (100 points); 4) Solow replication (100 points); 5) Real replication study (200 points); 6) Final exam on all the material (200 points). The final date is set by GMU. Questions Incompletes? Not without a medical excuse or something Ive not heard before. PDFs OK to my gmail account? Yes but only for first submission. Make sure that the subject line has your name, the assignment number and the course number so I can find them easily. Im at 93% capacity on my main account. May you use another program than Shazam. Yes. Can you use another program? No. Working together? OK on homeworks but not on take-home exams or replications. Why are we using M&T it is so old? M & T has the courage to confront uncertainty, everything else confronts risk. If you earn your living in financial econometrics you will confront uncertainty. Writing Intensive? Yes. This a writing-intensive class. As this class deals with graphical and numerical methods some modifications of the University rules are practiced.
http://wac.gmu.edu/program/wi_requirement/wicourses.php

All homework assignments must include a written explanation of the graphs and the numbers called for in the assignment. Homework can be redone but the returned homework with errors noted must be stapled to that resubmitted. The big writing assignment is the real replication paper.
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Economics 345 Week 1. Hello Shazam 11 & Introduction to monte carlo methods; The Library of Congress The Solow article; finding an article to replicate Levy & Peart Motivated Inquiry: Risk to Uncertainty SSRN Peart & Levy, Introduction to the Symposium Eastern Economics Journal 2008 Weeks 2-3 When the Problem is Uncertainty Not Risk Ashenfelter, Levine & Zimmerman, chapters 1-8 Mosteller & Tukey, chapters 1-9 [quickly, cut one] Week 4-5. Regression Ashenfelter, Levine & Zimmerman , chapters 9-11 Mosteller & Tukey, chapters 10-14 Week 6. Solow Article Robert M. Solow, Technical Change and the Aggregate Production Function The Review of Economics and Statistics, Vol. 39, No. 3. (Aug., 1957), pp. 312-320. Week 7-8. Testing hypotheses Ashenfelter, Levine & Zimmerman, chapter 11 Mosteller & Tukey, chapters 1-9 (again, 2nd cut) Week 9-10. Working with Regressions Ashenfelter, Levine & Zimmerman, chapter 12 Mosteller & Tukey, chapters 10-14 (again, 2nd cut) Week 11. Dependence & Time Series Ashenfelter, Levine & Zimmerman, chapter 14 Week 12-13. Simultaneous Equations and Econometric Ethics Ashenfelter, Levine & Zimmerman, chapter 15 Levy & Peart, Inducing Great Transparency Eastern Economic Journal 2008
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Econometrics: Problem Set 1 0. Get your Library of Congress card. 1. Get Shazam up and running. 2. Download ONE.TXT. Compute the sample means and medians for the two data streams (Y and X) in ONE.TXT. Check your answers with mine in ONE.OUT. 3. What is the standard error of the sample means. 4. (Optional). What is the standard error of the sample medians? A Writing-Intensive Replication study In overview the problem is to find a piece of published work, write a proposal to me to do this article, get my approval, obtain the data, recompute the regressions as indicated in the article, summarize the deviation between your computations and the article's, and submit a first draft of the paper describing your adventures. The paper must be submitted in standard form. Im partial to the University of Chicago rules laid down by Kate L. Turabian. Ill give comments and corrections. Then you turn in the final draft. What is a piece of published work? Any empirical article in any economics journal in JSTOR with a regression reported is, in principle, acceptable. However, some articles are too technical or the data sets are too large . It is your responsibility to find an acceptable article of applied econometrics. Look in JSTOR for articles in the late 1950s, early 1960s in which the data is printed along with the article. You obtain permission to use this article as the basis of your replication study by writing a proposal. The sixth week of class will be a trial replication in which you will be responsible for the replication Robert Solows great article on technical change. Here, everyone in class will do the same article. The data is included in the Solow article. Yes, you have to turn in a paper, standard form. Standard form is that described by Turabian. This is practice to get the formal aspects of a paper correct. The article for the real replication paper will be up to you. As encouragement to diligence I will allow only one student per article. Each article has to be registered with me by means of a written proposal which tells me the article, what regression(s) you propose to replicate in the article and where the data is to be found. First come, first served. I will pick an article for you but that would cost 40 points; picking the article is part of the assignment. That would be a very high price. The final draft of the paper is due the last day of class. The first draft will be due the week before that. The final draft must have the first draft with my comments attached so I make sure you responded to the queries. A check list for the real replication paper will be provided latter in the semester.

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Joys of the Library of Congress What happens if the data isnt in the article and it isnt easy to find on the web? Welcome to the Library of Congress. It is a really bad idea to go there looking for data without ever having been there before. Basic facts The Library of Congress takes up three buildings: the Jefferson, the Adams and the Madison. The Jefferson and the Adams are the size of a city block each. There is a useful tunnel system connecting the three buildings. The police force is Congresss own. Congress makes the laws and is ver y serious about protecting itself. This is the safest place in DC. Those are real weapons. Do not attempt to take in even a small knife. Getting there The Metro stop is Capitol South. Going from Vienna to Capitol South is trivial since there is only the Orange line service to Vienna. However, coming back, Capitol South is served by both Orange and Blue lines. It is easy to find yourself in an odd part of Virginia if you don't watch the colors at Capitol South. Parking is tricky around LC. The DC police are very efficient at collecting traffic revenues. As of a couple years ago it is $30 a pop. I dont drive any more. Jefferson Building. The main reading room and the computer terminals are here on Floor 1. You need an LC card to get in either of these. You may bring a computer. To read a book you 1) get a library card ) you will need a photo id ) and 2) present a call slip with your number on it. The books can be checked out to a reading desk or for overnight call to be picked up at the central desk next day. There are many copiers in alcove seven. You may bring a digital camera or a small scanner which for data work can be a big deal. The Jefferson building is also the home to the Rare Book Room and the Microform Reading Room. The stacks are off limits to even serious scholars ever since it was discovered that some of us were cutting out the plates of books. LC allows readers to bring in pieces of paper so it hard to check for plates, etc. on the way out Adams Building The Science Reading Room is on the fifth floor. Madison Building The Law Library, the Newspaper Room, Prints/Photos and the LC Archives are here. You get your card in the Madison Building. The LC Archives & the Rare Book Room are very high security. They won't let you bring paper in; rather, you are given paper. Hours 8:30a-5p on TuFSa; 8:30a-9:30pm on MWTh; closed Sunday.

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