1.

Time Series Modelling using Eviews

2. Macroeconomic Modelling using Eviews
3. Macroeconometrics using Eviews

By: Muhammad Anees

Saturday, October 27, 2012
Learn Econometrics, Applied Statistics, Stata, SPSS, Eviews,
R and Matlab on http://elearning.aneconomist.com

Plan of the Session

Some Theoretical Aspects?

Modelling the Systems

Proceeding with Eviews (Eviews 7)

Macroeconomic Models

What is Model?
o

Mathematical Models identifies the exact relation between included variables?

Macroeconomic variables are GDP, Investment, Consumption, Saving, Imports

and Exports etc. measured at the National Level?

Macroeconomic Model is thus the mathematical function which elaborates the

relationship of included macroeconomic variables? *

Types of Models?
o

Linear, Non-Linear?

Linear: Which shows ratio of constant changes in dependent (DV) and

independent variables (IV): Slope=ratio of changes in DV & IV=

Non-Linear Models on the other hands some variable ratios of IV and DV

Examples

A simple model to show the macroeconomic condition is the identification

of the relationship between macroeconomic variables.

A linear model will thus be defined for example as ?

We should check the nature of the variables and its impact the relation
being one sided or two sided, example is one
o

Investment: Autonomous and induced nature

Consumption: Autonomous and Induced nature

All other can be explained as above. For details, please read some elementary
books on Macroeconomic theory.

Hence the relation between any two macroeconomic variable is not that much
straightforward to estimate.

Flow of Modelling Strategy

It depicts the flow of identifying a model for the
system

Basic Models
Non-Linear
relation
Basic Models between two
Simple Linearvariables
Relation
between Two

Intermediate
Models
Relations
between more
than two
macro
variables

Advanced
Models
DSGE
Models using
Dynamic
System of
General
Equilibrium

Our Todays Strategy

Identify a simple Model and Estimate the Model using Eviews 7 using the given data for Pakistan
Second Session Will continue from here and will develop a more technical model

Model

The
Variable
s

Data

Eviews
Steps

Macroeconomic Model of Pakistan

Economy: The real Sector

The sample Modelling of Pakistans real economy

will develop the relationship between GDP, E , I,
GVA, (X-M: BOP or Trade Balance)?

The model we will elaborate and estimate is GDP =

E + I + GVA+(X M)?

Known issues?
o

The relation between the macroeconomic variable

poses some technical, Econometric challenges to
estimate. And read some literature on what are these
challenges if estimated using simple Regression or
Vector Autoregressive Models/Cointegrated Relations?

These issues are for the next sessions, please wait!!!!

The data

We have extracted a sample dataset from the databank of World

bank which is available from data.worldbank.org

The variables included are:

o
o
o
o
o

GDP:
E:
I:
GVA
X-M

The data is from variables (gdp

ge

inv gva impexp)

We take log of each series so when the log difference is used, it will
show growth rates of the series/variable

Econometric Techniques

OLS
o

Unit Root
o

Please read the first section of Growth Models reading which will explain each step we
proceed to run the regression using OLS and related tests.
We will need these types of tests when we need to run a regression model using time
series data
As we estimate the model (any other model can be used equally) using OLS, so the results
will be SPURIOUS/not be consistent.
In this case, we need to estimate the stationarity of the series. If series are stationary, then
we will be using OLS and may/may not include the trend/time variable
If the series are not stationary then we will test for whether each series is uniformly/same
integrated. Which means they become stationary at the same level of differencing.
Detailed discussion on these and the following contents will be provided tomorrow. This
is introduced here to convince you that we can not rely on the OLS estimates of our model
using time series data.

Cointegration
VAR
VECM

Appendix

Estimating the Model using OLS

Testing for Issues in the estimated Models
Some Econometric tests which could be used to determine whether the
model estimated is best fitted

Why we need to use alternative/Time Series regression Models? Read the

Unit Roots, VAR and Cointegration Testing topics from the given reading
material. We will improve our current model in second session.

Contact information: Please use only moodle@aneconomist.com for

discussion regarding these contents. This email is specific to course
related discussions.

Please read the notes below for details

Workfile Dialague to create workfile

New Workfile where data will be imported.

Import Wizard

Import Wizard: Data Specification

Dated Workfile with Complete dataset

Estimating the Macroeconomic Model we defined.

Regression Results

OLS Examples where it is Spurious

What Then if OLS is Spurious

If we use most of the Time Series data for running OLS, then results
are spurious if the Data is Not Stationary/Unit Root. Now how to
test Unit Roots. Let us what we can do using Eviews.

Unit Roots Testing

Unit Roots Testing

Unit Root Results

Unit Root test with First Difference

Unit Roots and Order of Integration

If we find that all the series are unit root or stationary then decide as
following:
o

o
o

All Series are not Unit Root or say they are stationary in Levels, then
these are called Integrated of Order Zero and termed as I(0)
All the series are Unit Root at Levels and Stationary at First Difference
then The are Integrated of Order One or I(1)
All the series are unit root even at First Differences but Stationary at
Second Differences then These are Integrated of Order Two or I(2).
And Hence On
We proceed in the same lines and once the Integration is determined,
then we can test whether they are Co-Integrated. This is for tomorrow
along with Theory, Practice and Issues.

We have learn Step by Step

Today we started modelling simple Macroeconomic Scenarios and

this can be extended to any type of models and enclosure of any type
of and list of macroeconomic variables. Do your practice on the
following model and determine where the series are stationary using
the Time Series data.

Note description of variables are available in Dataset second sheet.

Outcome of Todays Session

We hope to know now:

Modelling any Macroeconomic Scenario
Estimate the using Basic regression and test for whether regression
is Spurious

When Spurious how to proceed with further our model estimation.

Thanks for your attendance.

Please email any confusion regarding initiating your modelling
strategy.

Also please read the suggested contents so we are confident for

tomorrow session.