Lahore University of Management Sciences

ECON 330 Econometrics

Spring 2014- 2015

Instructor Farooq Naseer
Room No. 244
Office Hours Tuesday Thursday (after class)
Email farooqn@lums.edu.pk
Telephone
Secretary/TA
TA Office Hours
Course URL (if any)

Course Basics
Credit Hours
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 100 minutes
Recitation/Lab (per week) Nbr of Lec(s) Per Week 1 Duration 50 minutes
Tutorial (per week) Nbr of Lec(s) Per Week Duration

Course Distribution
Core Yes
Elective Economics / / Pol Econ
Open for Student Category Economics / / Pol Econ
Close for Student Category

COURSE DESCRIPTION
This is the second course in the statistics/econometrics sequence and looks at the broad range of estimation problems that often
arise in economic applications. In particular, we look at the criteria used to select a particular estimation method and the scenarios
under which the OLS estimator becomes sub-optimal. The purpose of this course is to teach students the basics of econometric
theory and also to give them hands-on experience with using a statistical package Stata, which will be helpful in later applications
especially for those students who choose to do an empirical senior project.

COURSE PREREQUISITE(S)





Probability and Statistics Or Statistics and Data Analysis; Microeconomics 1 Or Principles of Microeconomics;
Macroeconomics 1 Or Principles of Macroeconomics


Learning Outcomes




On successful completion students will: be able to develop a suitable regression model for a variety of empirically
interesting problems and validate the selected model via a battery of tests develop a basic understanding of time
series econometrics and be able to handle and make use of panel data be proficient in the use of Stata for
econometric analysis.
Grading Breakup and Policy

Assignment(s): (8) 20% Quiz(s): (6) 30% Project: 15% Final Examination: 35%



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Examination Detail
Midterm
Exam

Yes
Final Exam

Yes

Week/ Lecture/ Module Topics
Recommended
Readings
1.5 Introduction What is econometrics? Steps
in empirical economic analysis The
structure of economic data; random
sampling Simple Regression Model
Deriving the OLS estimates Algebraic
properties Deriving statistical properties:
mean and variance
Ch1. 1.1, 1.2, 1.4 Ch.2.1, 2.2, 2.4 Appendix B
1.5







1
Multiple Regression: Estimation
[[Causality and Marginal effects]]
Mechanics and Interpretation of OLS
Classical Linear Model Assumptions The
Gauss-Markov Theorem Properties of OLS
Mean and Variance


Topics in OLS: Effects of Data Scaling: 6.1
Functional Form: 6.2 Goodness-of-Fit and
Model Selection: 6.3 Functional form mis-
specification: 9.1
Ch. 3
2 Multiple Regression: Inference Sampling
Distribution of the OLS estimators The t-
test testing a single restriction
Confidence Intervals Testing multiple
restrictions

Multiple Regression Analysis: OLS
Asymptotics Law of Large Numbers and
Central Limit Theorem Consistency
Asymptotic Normality and Large Sample
Inference
Ch. 4 Ch. 5; Appendix C
1 Functional Form and Dummy Variables
Dummy independent variables Using
dummy variables for multiple categories
Interactions using dummy variables
Dummy dependent variable
Ch. 7
0.5 More Topics in OLS Prediction and
Residual Analysis: 6.4 Missing Data,
Outliers: 9.4
Ch. 6.4, 9.4

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1 Heteroskedasticity
Consequences of Heteroskedasticity
Robust inference
Testing for heteroskedasticity
Weighted Least Squares

Ch. 8
2 Instrumental Variable Estimation and
2SLS Correlation between X and error;
Omitted variable bias (3.3); OLS under
measurement error (9.3); Using Proxy
Variables for Unobserved Explanatory
Variables (9.2); IV estimation and the
2SLS; Testing for endogeniety and over-
identifying restrictions;
Ch 3.3, 9.2, 9.3, 15.1-15.5;

0.5 Simultaneous Equation Models The
nature of simultaneous equation models;
simultaneity bias in OLS; Identifying and
estimating a structural equation (vs.
reduced form); systems with more than
two equations
Ch 16.1-16.3

1
Regression with Time Series Data Nature
of time series data; Examples of TS
models; Finite sample properties of OLS
under Gauss-Markov assumptions;
Functional form, dummy variables, index
numbers; Trends and seasonality;
Ch. 10

1.5 Panel Data Models Pooling independent
cross-sections across time; two-period
panel data; differencing with more than
two time periods: fixed-effects estimation;
random-effects models; grouped data;
policy analysis (difference-in-difference
and panel estimation)
Ch 13.1-13.5; 14.1-14.3

1 Limited Dependent Variable Models and
Sample Selection Logit and Probit models
for binary response; [Depending on time:
the Tobit model for corner-solution
responses; Censored and Truncated
regression;] Sample selection corrections
Ch 17.1-17.5 (excl. 17.3)

Textbook(s)/Supplementary Readings
Wooldridge, Jeffrey M. 2006. Introductory Econometrics. 3
rd
edition. Thomson South-western.

Hamilton, Lawrence C. 2006. Statistics with Stata. Thomson Brooks/Cole.
Kennedy, Peter. 2008. A Guide to Econometrics. 6
th
edition. Malden: Blackwell Publishing.
Levitt, Steven D., and Stephen J. Dubner. 2009. Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. Harper Perennial.