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Economics 584
Time Series Econometrics

Winter 1999

Reading List

Last updated: February 16, 1999

Note: H denotes "Hamilton", C denotes "Cochrane" and F denotes "Franses". * denotes most relevant reading. For those with strong interests in time series econometrics, check out Peter C.B. Phillips' courses Time Series Econometrics I and Time Series Econometrics II (Yes, at Yale you get a full year of time series econometrics. During a Christmas party skit at Yale, Peter Phillips did a monologue about how he would change the graduate curriculum if he became chairman. The first year courses would be econometrics 1-6 and the second year courses would be econometrics 7-12.).

Note: Readings listed in red are in the reading packet available at the AVE Copy Center (on University next to Big Time Brewery).

Weeks 1-2: Stationary Univariate Models, Model Selection

Textbook Readings

Additional Readings

• C, chapters 1 - 6.
• F, chapters 1-3.2.
• H, chapters 1- 3.

Week 3: Estimation and Forecasting

Textbook Readings

Additional Readings

• F, sections 3.3-3.5.
• H, chapters 4-5.

• Diebold, F.X. (1998), "The Past and Present of Macroeconomic Forecasting," Journal of Economic Perspectives, 12, 175-192.
• *Diebold, F.X. and R.S. Mariano (1995), "Comparing Predictive Accuracy," Journal of Business and Economic Statistics, 13, 253-265.
• Mark, N. (1995),  "Exchange Rates and Fundamentals: Evidence on Long-Horizon Predictability," American Economic Review.

Week 4: Asymptotic Distribution Theory, Beveridge Nelson Decomposition and  Unit Roots

Textbook Readings

Additional Readings

• C, chapter 10.
• F, chapters 4.
• H, chapters 15-17.

• *Campbell, J.Y. and P. Perron (1991), "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots and Cointegration," NBER Macroeconomics Annual, Cambridge, MA: MIT Press.
• Campbell, J. and G. Mankiw (1987), "Are Output Fluctuations Transitory," Quarterly Journal of Economics. Available in JSTOR.
• Clark. P.K. (1987), "The Cyclical Component of U.S. Economic Activity," Quarterly Journal of Economics. Available in JSTOR.
• Cochrane, J. (1988), "How Big is the Random Walk Component in GNP," Journal of Political Economy, No. 5. Available in JSTOR.
• *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, 139-162.
• *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. (1999), Lecture notes on asymptotic distribution theory.
• Zivot, E. (1999), Lecture notes on the Beveridge-Nelson decomposition.
  

Week 5: Unit Roots and Trend Breaks

Textbook Readings

Additional Readings

• F, chapter 6.
• H, chapters 8-9.

• Ben-David, 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, 453-475.
• Campbell, J.Y. and P. Perron (1991), "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Macroeconomics Annual, Cambridge, MA: MIT Press.
• Perron, P. (1990), "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business and Economic Statistics, 8, 153-162.
• Perron, P. (1993), "Trend, Unit Root and Structural Change in Macroeconomic Time Series," in B.B. Rao (ed.) Cointegration: Expository Essays for the Applied Economist, MacMillan.
• Perron, P. and T. Vogelsang (1992), "Nonstationarity and Level Shifts with an Application to Purchasing Power Parity," Journal of Business and Economic Statistics, 10, 301-320.
• 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.
• Vogelsang, T. (1997), "Wald-Type Tests for Detecting Breaks in the Trend Function of a Dynamic Time Series," Econometric Theory, Vol. 13(6), 818-849.
• 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, 251-70.
• Zivot, E. (1999), Lecture notes on ADF unit root tests.
• Zivot, E. (1999), Lecture notes on PP unit root tests.
• Zivot, E. (1999), Lecture notes on structural breaks

Week 6: Dynamic Regression Models and Introductin to VAR Models

Textbook Readings

Additional Readings

• C, chapter 7.
• F, chapter 9.
• H, chapters 10, 11.1-11.6

• Canova, F. (1994), "VAR Models: Specification, Estimation, Inference and Forecasting," in H. Pesaran and M. Wickens (eds.), Handbook of Applied Econometrics. Oxford: Basil Blackwell.
• Canova, F. (1995), "The Economics of VAR Models," chapter 3 in Hoover, K.D. (ed.) Macroeconometrics: Developments, Tensions, and Prospects, Kluwer.
• Dwyer, M. (1999), Lecture notes on stationary VARs. Department of Economics, UCLA. Note: Mark also has a bunch of GAUSS code for the analysis of VARs.
• Lutkepohl, H. (1993), "Stable Vector Autoregressive Processes," chapter 2 in Introduction to Multiple Time Series Analysis, Second Edition.
• Sims, C.A. (1980), "Macroeconomics and Reality," Econometrica, 48, 1-48. Available in JSTOR.
• Sims, C.A. (1992), "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," European Economic Review.
• Zivot, E. (1999), Lecture notes on VARs (introduction)

Week 7: Structural VAR Models

Textbook Readings

Additional Readings

• H, chapter 11, sections 1-7.

• *Blanchard, O.J. and D. Quah (1989), "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, 79, 655-673.
• Bernanke, B. (1986), "Alternative Explanations of the Money-Income Correlation," Carnegie Rochester Conference Series on Public Policy, 25, 49-99.
• *Canova, F. (1995), "The Economics of VAR Models," in K. Hoover (ed.), Macroeconometrics: Tensions, Developments and Prospects, Kluwer.
• Dwyer, M (1999), Lecture notes on structural VARs. Department of Economics, UCLA.
• *Gali, J. (1992), "How Well Does the ISLM Model Fit Postwar Data?" Quarterly Journal of Economics 107, 709-735.
• King, R.G. and M. Watson (1997), "Testing Long-Run Neutrality," Federal Reserve Bank of Richmond Economic Quarterly, Vol. 83/3.
• Sarte, P-D (1997), "On the Indentification of Structural Vector Autoregressions," Federal Reserve Bank of Richmond Economic Quarterly, Vol. 83/3.
• *Watson, M. (1998), Lecture notes on VAR modeling.
• Watson, M. (1995), "VARs and Cointegration" chapter 47 (section 4) in Handbook of Econometrics, Vol 4.
• Zivot, E. (1999), Lecture notes on VARs (inference).
• Zivot, E. (1999), Lecture notes on VARs (identification using Choleski decomposition).
• Zivot, E. (1999), Lecture notes on VARs (identification using long-run restrictions).

Week 8: Spurious Regression and Cointegration

Textbook Readings

Additional Readings

• C, chapter 11.
• F, chapter 10
• H, chapters 18; chapter 19, section 1.

• Campbell, J.Y. and P. Perron (1991), "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Macroeconomics Annual, Cambridge, MA: MIT Press.
• Dwyer, M. (1999), Lecture notes on cointegration. Department of Economics, UCLA.
• Watson, M. (1995), "VARs and Cointegration" chapter 47 (sections 1-3) 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.

Week 9: Examples of Cointegration

Textbook Readings

Additional Readings

None

• Crowder, W.J. and M.E. Wohar (1997), "Are Tax Effects Important in the Long-Run Fisher Relation: Evidence from the Municipal Bond Market," forthcoming in Journal of Finance.
• Zivot, E. (1998), "Cointegration and Forward and Spot Exchange Rate Regressions," unpublished manuscript, University of Washington.

Week 10: Inference in Cointegration Models

Textbook Readings

Additional Readings

• F, chapter 10.
• H, chapters 19 and 20.

• Crowder, W.J., Dennis L. Hoffman and Robert Rasche (1994), "Identification and Inference in Cointegrated Systems and the Specification of Structural VAR Models," forthcoming in Review of Economics and Statistics.
• *Johansen, S. (1996), "Likelihood-based Inference for Cointegration of Some Nonstationary Time Series," chapter 2 in D.R. Cox, D.V. Hinkley and O.E. Barndorff-Nielsen (eds.), Times Series Models in Econometrics, Finance and Other Fields, Chapman & Hall.
• Watson, M. (1995), "VARs and Cointegration" chapter 47 (section 3) in Handbook of Econometrics, Vol 4.