Economics 583: Econometric Theory I

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Course Description

Fall 2007
Office hours: M 11-12, Tu 4-5

Eric Zivot
418 Condon Hall
543-6715

This is a general course in econometric theory for second year Ph.D. students in economics. The main goal of the course is to develop the econometric and statistical tools necessary for reading and understanding the current literature in econometrics. A secondary goal is to introduce some current research topics in econometrics. The main focus of the course will be on estimation and inference in econometric models using the generalized method of moments and maximum likelihood techniques.

Textbooks and Other Background Material

The main textbooks are

  1. Hayashi, F. (2000). Econometrics. Princeton University Press. Check out Hayshi's homepage with errata, answers to analytical exercises and review problems and other supplemental material.
  2. Hall, A.R. (2005). Generalized Method of Moments. Advanced Texts in Econometrics, Oxford University Press.

Supplemental textbooks are (first two used for Econ 581 and 582)

  1. Davidson, R. and MacKinnon, J. (2003). Econometric Theory and Methods, Oxford University Press.
  2. Greene, W. (2003), Econometric Analysis, Fifth Edition, Prentice Hall.
  3. Zivot, E. and J. Wang (2006). Modeling Financial Time Series with S-PLUS, 2nd Edition. Springer-Verlag.
  4. Matyas, L.  (ed.) (1999), Generalized Method of Moments, Cambridge University Press: Cambridge, UK.

I will also assign readings from various journal articles and working papers. See the class syllabus page for details.

Course Prerequisites

Prerequisites for course are Economics 580 - 582 (or equivalents). I will assume that you are familiar with the classical linear regression model and its extensions, and have been exposed to maximum likelihood estimation. In addition, I will assume that you are familiar with Eviews and at least one matrix programming language (GAUSS, Matlab, Ox, R or S-PLUS).

Course Requirements

  1. Weekly homework assignments (20%)
  2. GMM replication paper (40%)
  3. Take home Final exam (40%)

The homework assignments will make use of various statistics and econometrics programs (Eviews, Matlab and S-PLUS). The research paper requirement is fairly general and may involve an applied project, theoretical project or simulation experiment. However, the paper cannot be used to satisfy a paper requirement for another course.

The GMM replication paper must involve a replication of an existing empirical study (working paper or published paper) that uses GMM estimation in an empirical study. It is important that you choose a topic for your paper early in the quarter. Once you have picked a paper to replicate, you must obtain my approval to use it for class. Everyone must have a paper topic no later than Friday, November 16, 2007. A final version of the paper must be submitted either in hardcopy or electronically in pdf format by 6.00pm on Friday, December 16, 2007.

Replication Paper Guidelines

The following must be addressed in your GMM analysis

  • Clear description of underlying economic/statistical model
  • Presentation of moment conditions (they need not be fully derived) used for estimation
  • Discussion of identification issues if any
  • Discussion of choice of weight matrix
    • HC vs HAC estimator of S
  • Discussion of type of GMM estimator (inefficient, 2-step efficient, iterative, CU etc)
  • Presentation of estimation results with discussion
  • J test of overidentification conditions (if applicable)
  • Tests of other hypotheses (if applicable)