Econometrics 1

Introductory Econometrics

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The Nature of Econometrics and Economic Data

Stefan P. Schleicher University of Graz
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1.

What is econometrics? (1)

A tool of mathematical statistics, used for

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Dealing with relationships between variables Estimation of parameters

Estimation of parameters of functions Testing hypotheses about parameters of functions

Testing of hypothesis

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What is econometrics? (2)

Econometric methods are useful in many other fields besides economics

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Investigating laws of physics Medical problems

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2.

Steps in empirical economic analysis (1)

Econometric analysis
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Hypothesis from economic theory about economic relationship between variables

Micro and macroeconomic theory Cross section Time series Combination of both Source of data

Data collection

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2.

Steps in empirical economic analysis (2)

Econometric analysis
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Econometric specification = econometric model = hypothesis about data generation process (DGP)

Functional form Numerical estimates for parameters based on data sample Testing suggested hypothesis about parameters based on data sample

Parameter estimation

Testing hypotheses about parameters

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3.

The structure of economic data

Structure of data sample

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Cross-sectional data

(random) sample from underlying population Rarely independent over time Data frequency Cycles

Time series data

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Pooled cross-sectional and time series data Panel or longitudinal data

The same cross-sectional units are followed over a given time period
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Searching for causality and predictability

The fundamental controversies

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Ceteris paribus

other (relevant) factors being equal Direct causal relationships Endogenous (output) and exogenous (input) variables Theory of stochastic processes

Structural models

Restricted and unrestricted reduced form models

Time series models

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5.
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A brief history of econometrics (1)

Fertilizer experiments Ragnar Frisch Simon Kuznets John Maynard Keynes Jan Tinbergen Foundations of econometric theory

The roots of agricultural statistics The start in the 1930s

The Cowles Commission in the 1940s

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5.
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A brief history of econometrics (2)

The first wave of structural macro-econometric modeling

The age of Lawrence R. Klein

The anti-thesis of non-structural macro-econometric modelling

Stationary and non-stationary time-series models ARIMA, VAR Clive W. Granger and Robert F. Engle

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Causality and trends

The return of dynamic structural macro-econometric modeling

David F. Hendry, Stephen G. Hall

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6.

References

Textbook Wooldridge, Jeffrey M. (2005) Introductory Econometrics: A Modern Approach. South-Western College Publishing BPD 37.00

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