Economics 584:
Time Series Econometrics

Home
Syllabus
Homework
Notes
Announcements
Links
Programs
Papers 
Syllabus
Spring 2006
Last updated:
May 31, 2006
Note: H denotes "Hamilton", HY denotes "Hayashi",
"C" denotes Cochrane,
and MFTS denotes "Modeling Financial Time Series with SPLUS". * denotes the most relevant reading.

Stationary Univariate Models,
Estimation and Model Selection 
Textbook
Readings 
Additional
Readings 
 C, chapters 14, and 6
 H, chapters 1 3.
 HY, chapter 2, section 2;
chapter 6, sections 1 and 2.

MFTS, 3 (sections
14).

 MFTS, chapters 12
 Zivot, E. (2006).
Class slides on stationary time series. (updated March 29, 2006).
 Zivot, E. (2006).
Powerpoint examples
for stationary time series. (updated April 5, 2006)
 Zivot, E. (2006).
Class slides on BoxJenkins methodology.
(updated April 5, 2006)
 Zivot, E. (2006).
Powerpoint examples for
BoxJenkins methodology. (updated April 5, 2005).
 Zivot, E. (2005).
Lecture notes on ARMA estimation
(updated April 11, 2005)

StateSpace
Models, Forecasting and Asymptotic
Theory 
Textbook
Readings 
Additional
Readings 
 C, chapter 5
 H, chapters 4 (pgs. 7285, 102113), 5 (117126, 133148)
7 (main
result is Proposition 7.11), and 13 (sections 1  5)

 Diebold, F.X. (1998), "The Past and Present of
Macroeconomic Forecasting," Journal of Economic Perspectives, 12,
175192.
 *Diebold, F.X. and R.S. Mariano (1995), "Comparing Predictive Accuracy," Journal
of Business and Economic Statistics, 13, 253265. Reprinted in Journal
of Business and Economic Statistics, 20(1), 134145, January 2002.
 Mark, N. (1995), "Exchange Rates and Fundamentals:
Evidence on LongHorizon Predictability," American Economic Review.
Available in JSTOR.
 Stock, J.S. (2001). "Forecasting Economic Time
Series," chapter 27 in Baltagi (ed.) A Companion to Theoretical
Econometrics, Basil Blackwell.
 Zivot, E. (2006).
Lecture notes on forecasting (updated
April 11, 2006)
 Zivot, E. (2006).
Class slides on forecasting;
Powerpoint examples.
(updated April 11, 2006)
 Zivot, E. (2006).
Lecture notes on state space models
and the Kalman filter.
(updated April 11, 2006)
 Zivot, E. (2006).
Class slides on state space
models. (updated April 17, 2006)

Introduction
to Univariate Nonstationary Time Series 
Textbook
Readings 
Additional
Readings 
 C, chapter 10
 H, chapters 14, 15.
 HY, chapter 9.
 MFTS, chapter 14.

 Beveridge, S. and C.R. Nelson (1981), "A New
Approach to Decomposition of Economic Time Series into Permanent and
Transitory Components with Particular Attention to Measurement of the
Business Cycle," Journal of Monetary Economics, 7, 15174.
 Campbell, J. and G. Mankiw (1987), "Are Output
Fluctuations Transitory?," American Economic Review.
 Clark. P.K. (1987), "The Cyclical Component of U.S. Economic Activity," Quarterly
Journal of Economics. Available in JSTOR.
 *Morley, J., C.R. Nelson and
E. Zivot (2003), "Why are Beveridge Nelson and Unobserved
Components Decompositions of GDP so Different?," Review of
Economics and Statistics.
 *Nelson, C.R. and C.I. Plosser (1982), "Trends and Random Walks in Macroeconomic
Time Series: Some Evidence and Implications," Journal of Monetary Economics,
10, 139162.
 *Stock, J.S. and M.Watson (1988), "Variable Trends in Economic Time Series," Journal
of Economic Perspectives, Vol 2, No. 3. Available in JSTOR.
 Zivot, E., J. Wang and S.J.
Koopman (2003). "State Space Modeling in
Macroeconomics and Finance using SsfPack in S+FinMetrics".
 Zivot, E. (2006).
Lecture notes on trendcycle decompositions.
(updated: April 18, 2006)
 Zivot, E. (2006).
Class slides on trendcycle
decompositions; Powerpoint examples. (updated: April 18, 2006).

Asymptotics
for Nonstationary Data and Unit Root Tests 
Textbook
Readings 
Additional
Readings 
 H, chapter 17.
 HY, chapter 9.
 MFTS, chapter 4.

 *Campbell, J.Y. and P. Perron (1991), "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit
Roots," NBER Macroeconomics Annual, Cambridge,
MA: MIT Press.
 Kiwiatkowski, D., Phillips, P.C.B., Schmidt, P., and Shin, Y. (1992),
"Testing the Null Hypothesis of Stationarity against the
Alternative of a Unit Root: How Sure Are We that Economic Time Series
Have a Unit Root?," Journal of Econometrics, 54: 159178.
 Phillips, P.C.B. (1987), "Time Series
Regression with a Unit Root," Econometrica, 55, 277301.
 Phillips, P.C.B. and Z. Xiao (1997), "A Primer on Unit Root Testing,"
Cowles Foundation Discussion Paper.
 *Stock, J.S. (1995), "Unit Roots and Trend Breaks",
in Handbook of Econometrics, Vol 4.
 Ng, S., and P. Perron (1995). "Unit Root Tests in
ARMA Models with DataDependent Methods for the Selection of the
Truncation Lag," Journal of the American Statistical Association,
90, 268281.
 Elliot, G., T.J. Rothenberg, and J.H. Stock (1996).
"Efficient Tests for an Autoregressive Unit Root," Econometrica,
64, 813836.
 Ng, S., and P. Perron (2001). "Lag Length Selection
and the Construction of Unit Root Tests with Good Size and Power,"
Econometrica, 69, 15191554.
 Zivot, E. (2005).
Class slides on unit root tests.
(updated: April 26, 2006)
 Zivot, E. (2005).
Class slides on unit root tests part
II (updated: April 26, 2006)
 Zivot, E. (2006).
Class slides on
asymptotics for nonstationary processes. (updated: April 26, 2006).

Structural
Change and Nonlinear Models (not covered in class) 
Textbook
Readings 
Additional
Readings 

 *Andrews, D.W.K. (1993), "Tests for
Parameter Instability and Structural Change with Unknown Change
Point," Econometrica, 59, 817858.
 Andrews, D.W.K. and W. Ploeberger (1994),
"Optimal Tests When a Nuisance Parameter is Present Only Under
the Alternative," Econometrica, 62, 13831414.
 *Bai, J. and P. Perron (1998), "Estimating
and Testing Linear Models with Multiple Structural Changes," Econometrica,
66, 4778.
 Bai, J. and P. Perron (2002), "Computation
and Analysis of Multiple Structrual Change Models," Journal of
Applied Econometrics, 18, 122.
 BenDavid, D. and D.H. Papell (1995), "The Great Wars, the
Great Crash, and Steady State Growth: Some New Evidence About an Old Stylized Fact,"
Journal of Monetary Economics 36, 453475.
 Greene, Econometric Analysis 5th Edition,
chapter 7 (section 5).
 Hansen, B.E. (1992). "Testing for Parameter
Instability in Linear Models, Journal of Policy Modeling,
14(4), 517533.
 Sakoulis, G. and E. Zivot (2004), "Time
Variation and Structural Change in the Forward Discount: Implications
for the Forward Rate Unbiasedness Hypothesis," Working Paper,
Department of Economics, University of Washington.
 *Stock, J.S. (1995), "Unit Roots and Trend Breaks",
in Handbook of Econometrics, Vol 4.
 Vogelsang, T. (1997), "WaldType Tests for Detecting Breaks
in the Trend Function of a Dynamic Time Series," Econometric Theory, Vol.
13(6), 818849.
 *Zivot, E. and D.W.K. Andrews (1992), "Further Evidence on the Great Crash, the Oil
Price Shock and the Unit Root Hypothesis," Journal of Business and Economic
Statistics 10, 25170. Reprinted in Journal
of Business and Economic Statistics, 20(1), January 2002.

Introduction to
Stationary VAR Models 
Textbook
Readings 
Additional
Readings 
 C, chapter 7
 H, chapters 10, 11.111.6
 MFTS, chapter 11

 Canova, F. (1995), "The Economics of VAR Models,"
chapter 3 in Hoover, K.D. (ed.) Macroeconometrics: Developments, Tensions, and
Prospects, Kluwer.
 Lutkepohl, H. (2000), "Vector
Autoregressions," Chapter 32 in Baltagi, B. (ed.) A
Companion to Theoretical Econometrics. Basil Blackwell.
 Sims, C.A. (1980), "Macroeconomics and Reality," Econometrica, 48,
148. Available in JSTOR.
 Sims, C.A. (1992), "Interpreting the Macroeconomic Time
Series Facts: The Effects of Monetary Policy," European Economic Review.
 *Stock and Watson (2001), "Vector
Autoregressions", Journal of Economic Perspectives, 15(4).
 *Zivot, E. (2005).
Class slides on multivariate
time series and VAR models (updated: May 3, 2006).
Powerpoint examples.

Structural VAR Models 
Textbook
Readings 
Additional
Readings 
 H, chapter 11, sections 17.

 *Blanchard, O.J. and D. Quah (1989), "The Dynamic Effects of
Aggregate Demand and Supply Disturbances," American Economic Review,
79, 655673. Available in JSTOR.
 Bernanke, B. (1986), "Alternative Explanations of the
MoneyIncome Correlation," Carnegie Rochester Conference Series on Public
Policy, 25, 4999.
 Gali, J. (1992), "How Well Does the ISLM Model Fit Postwar
Data?" Quarterly Journal of Economics 107, 709735.
 King, R.G. and M. Watson (1997), "Testing LongRun Neutrality,"
Federal Reserve Bank of Richmond Economic Quarterly, Vol. 83/3.
 *Levtchenkova, S., A. Pagan
and J. Robertson, (1999), "Shocking Stories," in M.
McAleer and L. Oxley (eds.) Practical Issues in Cointegration
Analysis, Basil Blackwell: Oxford.
 Sarte, PD (1997), "On the
Indentification of Structural Vector Autoregressions," Federal Reserve Bank of
Richmond Economic Quarterly, Vol. 83/3.
 *Stock and Watson (2001), "Vector
Autoregressions", Journal of Economic Perspectives, 15(4).
 Watson, M. (1995), "VARs and Cointegration"
chapter 47 (section 4) in Handbook of Econometrics, Vol 4.
 *Gottschalk, J. (2001). "An
Introduction into the SVAR Methodology: Identification, Interpretation and
Limitations of SVAR Models," unpublished manuscript, Institut fur
Welwirtschaft.
 *Zivot, E. (2005).
Class slides on structural VAR models
(updated: May 10, 2006)
 Zivot, E. (2005).
Class slides on structural VAR models part
2 (updated: May 22, 2006).

Spurious Regression and Cointegration 
Textbook
Readings 
Additional
Readings 
 C, chapter 11
 H, chapters 18; chapter 19, section 1.
 HY, chapter 10.
 MFTS, chapter 12.

 Campbell, J.Y. and P. Perron (1991), "Pitfalls and
Opportunities: What Macroeconomists Should Know About Unit Roots," NBER
Macroeconomics Annual, Cambridge, MA: MIT Press.
 *Johansen, S. (1996), "Likelihoodbased Inference for
Cointegration of Some Nonstationary Time Series," chapter 2 in D.R. Cox, D.V.
Hinkley and O.E. BarndorffNielsen (eds.), Times Series Models in Econometrics,
Finance and Other Fields, Chapman & Hall.
 Watson, M. (1995), "VARs and Cointegration"
chapter 47 (sections 13) in Handbook of Econometrics, Vol 4.
 Stock, J.S. and M. Watson (1988), "Variable Trends in Economic Time Series," Journal
of Economic Perspectives, Vol 2, No. 3. Available in JSTOR.
 Zivot, E. (2000), "Cointegration
and Forward and Spot Exchange Rate Regressions," Journal of
International Money and Finance.
 Zivot, E. (2005).
Class slides on cointegration
(updated: May 31, 2006).
Powerpoint examples.
 Zivot, E. (2005).
Class slides on cointegration
part 2 (updated: May 31, 2006).

Structural
VARs and Cointegration 
Textbook
Readings 
Additional
Readings 

 Gonzalo, J. and S. Ng. (2002). "," Journal
of Economic Dynamics and Control.
 Levtchenkova, S., A. Pagan
and J. Robertson, (1999), "Shocking Stories," in M.
McAleer and L. Oxley (eds.) Practical Issues in Cointegration
Analysis, Basil Blackwell: Oxford.
 Crowder, W.J., Dennis L. Hoffman and Robert Rasche (1994), "Identification and Inference in
Cointegrated Systems and the Specification of Structural VAR Models," Review of Economics and Statistics.
 Yan, B. and E. Zivot (2005), "The Dynamics of
Price Discovery," Working Paper, Department of Economics,
University of Washington.
