1 ECONOMETRICS ECON/DECS B360-001 Fall 2019 Course Location: 1 st floor computer lab, Miller Hall Class hours: 2:00 – 3:15 Tuesdays and Thursdays Instructor: John Levendis Office: Miller 315 Office phone: 864-7941 Email: [email protected]Office Hours: 3:30-4:30 am Tuesdays and Thursdays and by appointment. Course Prerequisites: Principles of Microeconomics (ECON B100), Principles of Macroeconomics (ECON B101), Business Statistics (DECS 205), and Junior standing. Terms of Use: A student's continued enrollment in this course signifies acknowledgment of, and agreement with, the statements, disclaimers, policies, and procedures outlined within this syllabus and elsewhere in the Blackboard environment. This Syllabus is a dynamic document. Elements of the course structure (e.g., dates and topics covered, but not policies) may be changed at the discretion of the professor. College of Business Mission Statement: In the Ignatian tradition, the mission of the College of Business is to provide a superior value-laden education that motivates and enables students to become effective and socially responsible business leaders. We strive to contribute quality research, serve local and intellectual communities, and graduate students who possess critical thinking skills and courage to act justly in a global business environment. Course Description: Econometrics is an intermediate level statistics course. After a brief overview of statistics, the course covers least squares estimation, statistical inference, diagnostic methods, selection and evaluation of functional form, and simultaneous equations estimation. The course focuses more on applied work than on its theoretical underpinnings. Students are actively involved with computer exercises in this course, using the STATA software program. Students will complete a comprehensive statistical research project. By the time you are finished, you will have learned a skill that most employers value, are willing to pay for, and are utterly mystified by! Expected outcomes: Students completing this course should be able to: Articulate a statistically testable claim Choose the right statistical method to test this claim Use tools of statistical inference in order to evaluate claims based on sample data
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ECONOMETRICS ECON/DECS B360-001 Fall 20191 ECONOMETRICS ECON/DECS B360-001 Fall 2019 Course Location: 1st floor computer lab, Miller Hall Class hours: 2:00 – 3:15 Tuesdays and Thursdays
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1
ECONOMETRICS
ECON/DECS B360-001 Fall 2019
Course Location: 1st floor computer lab, Miller Hall
Free discussion, inquiry, and expression are encouraged in this class. Classroom behavior that
interferes with either (a) the instructor’s ability to conduct the class or (b) the ability of students
to benefit from the instruction is not acceptable. Examples may include routinely entering class
late or departing early; use of beepers, cellular telephones, or other electronic devices; talking
while others are speaking; or arguing in a way that is perceived as “crossing the line of civility.”
The Term Paper
Your assignment is to construct an econometric model of a functional relation that is
interesting to you, collect the relevant data, and estimate the model dealing with possible
statistical problems that might arise.
You must clear your idea with your professor before getting started on your project. You can
find ideas for possible projects from examples in our text, from questions that are raised in your
other classes, or from journals that publish applied statistical research, such as The Review of
Economics and Statistics, Applied Economics, The Journal of Applied Econometrics, and various
other journals from almost any business field.
I will impose very few restrictions on the nature of this project; the application does not
have to be an economic relation. However, there are some projects that are likely to be less
suitable than others, because of unavailable data or lack of interesting testable hypotheses.
Therefore, to guarantee that your project remains on the right track, you are required to regularly
submit portions of your paper.
Once we have agreed on a project, you should collect the data. If you were to propose a model of
wage determination, would you observe wages of individuals at a point in time, or would you
model average wages in the US over time, or possibly average wages of states observed across
states? Clear thinking about this issue is vital to developing a reasonable econometric model.
The next step is to begin estimation. You will probably want to try several alternative
specifications of your model, and you will undoubtedly encounter various statistical problems.
An important part of the project is the testing and treatment of these various econometric
problems, using procedures presented in the course. You should document your use of these
procedures.
Grading is neither by pound of output or written material, nor by complexity of project, but
rather by:
1. Economic theory behind the design of your econometric model;
2. Appropriateness of the procedures selected; and
3. Completeness and clarity in communicating the results and the policy implications.
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The Progression of the Paper Preliminary Report 1: The Problem Statement, its significance.
1. Select your topic in consultation with your instructor. 2. Justify the selection of your topic: Why should we care? 3. Make sure that the necessary data are, at least in principle, available. 4. Fill out and turn in the “Preliminary Report 1: Paper Topic” sheet. You will find it a couple of pages
after this one. Preliminary Report 2: Literature Review:
1. Type up a proper introduction to your paper. You should establish what your research question is, and why it is important. (See your Preliminary Report 1 if you’ve forgotten.)
2. Survey the literature a. What type of analysis did previous researchers do? b. What data did they use? Where did they get it? c. What were their results?
3. Include a proper bibliography. 4. Very briefly, what type of economic model and data do you intend to use?
Preliminary Report 3: A fixed-up version of Report 2, plus a description of your data:
1. Define your variables. 2. Describe the data. Are they categorical, ordinal, continuous… 3. Describe your data sources. 4. Summarize the data using simple summary-stats and graphs. 5. Write your hypotheses and speculate on what you expect to find and why
(i.e. what are the expected effects of each variable?)
Rough Draft: A fully written paper, submitted for peer review
1. Treat this as though it were your final submission. 2. Perform the data analysis. 3. Explain to the reader why you did what you did. 4. What are your estimation results? Conclusions? 5. Your paper will be reviewed, anonymously, by your peers for constructive feedback,
so only put your name on a cover sheet. Referee’s Report
1. Summarize in your own words a classmate’s paper 2. Offer criticisms and suggestions for improvement 3. Grade the paper
Final Report: Final Submission This final submission will be a finished, polished research paper.
1. You should stress your conclusions, 2. Explain how they compare with previous studies’ results, and 3. Discuss how your results have any implications for theory or policy.
10
Preliminary Report 1: Paper Topics
You can research whatever topic you want, as long as you research it statistically, using the tools
presented in this class. Coming up with a paper topic that is doable is harder than it seems. It is
easy to come up with interesting research questions; it is much more difficult to find the data you
would need to answer those questions.
Here are some preapproved topics:
Micro
1. The correlation between sexual orientation and wages (Are LGBT discriminated
against?)
2. What is the relationship between alcohol consumption and personal income?
Macro
3. The correlation between economic freedom and economic growth/income? (Are freer
countries richer? Do they grow quicker?)
4. What is the correlation between corruption and economic growth/income?
5. What is the relationship between gender equality and economic growth/incomes? (Is it
bad for the economy to discriminate against women?)
6. What is the relationship between income inequality and economic growth/income?
7. What is the relationship between pollution and economic growth/income?
Finance
8. What is the relationship between economic freedom and stock market returns/volatility?
9. What is the relationship between corruption and stock market returns/volatility?
Some suggestions:
Stay away from sports topics. Baseball has tons of data, but it is not provided in a format
that is amenable to regression analysis.
Don’t do country-specific macroeconomic studies. If you’re going to do macro, stick with
cross-country research questions. Ex: do countries with high inflation rates have lower
rates of long-term growth? Rather than, did the US experience higher growth when it had
higher inflation rates?
Don’t do a study on drugs. It’s a fun topic to think about, but the data are much too hard
to find.
Flip through your old textbooks, and remind yourself what questions you had. For
example, when in an environmental econ class, did you ever wonder how GDP varies
with gasoline prices? Or what the correlation is between unleaded and diesel prices?
Keep it simple: what is the relationship between X and Y. (We’ll have ample opportunity
to complicate things later.)
Meet with me to discuss your ideas. You should come prepared to our meeting with ten
research questions.
After we have discussed your paper ideas, you should pick one. Think about what your X
and Y variables will be, as well as what these factors (in “holding other factors constant”)
might be. Fill out and turn in the sheet on the next page.
My paper will investigate the effect of X on Y, holding other things constant.
Here is what my variables will likely consist of:
Y (my one dependent variable) = _____________________________________
X1 (my main independent variable) = ___________________________________
X2 (other variables that might affect Y) = ___________________________________
X3 (other variables that might affect Y) = ___________________________________
X4 (other variables that might affect Y) = ___________________________________
X5 (other variables that might affect Y) = ___________________________________
X6 (other variables that might affect Y) = ___________________________________
X7 (other variables that might affect Y) = ___________________________________
X8 (other variables that might affect Y) = ___________________________________
X9 (other variables that might affect Y) = ___________________________________
X10 (other variables that might affect Y) = ___________________________________
You don’t need to have all X2-X10 filled out, but you should have some idea of what these
“other factors” might be that affect Y.
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Preliminary Report 2: The Literature Review
Not to be confused with a book review, a literature review surveys scholarly articles (and
sometimes books) relevant to a particular area of research and provides a description, summary,
and thematic grouping of each work. The purpose is to offer an overview of significant literature
published on a topic.
You can find relevant articles using:
1. EconLit – a database of all economics articles, which you can access through the Monroe
Library website.
2. Google Scholar – provides a broader search, beyond strictly economics articles.
3. The bibliographies from papers that are already in your lit review
4. Web of Science’s “cited reference search”. This allows you to do a bibliography going
forward in time; that is, it gives you a list of all the papers that have cited a particular
paper. Think of it as a reverse bibliography.
You will notice that each academic article follows a specified format. Usually, they motivate the
research in the first couple of paragraphs. That is, they explain why the topic is of interest. Then
they dive right into a literature review. This is their attempt to bring the reader up to speed on the
literature. (It also points out areas where the current research is lacking, and where their research
will fill those gaps.)
These papers’ literature reviews will be a second source of relevant articles. If they mention an
article, you should probably read that article, too. So the bibliography provides a third place to
find articles to cite.
How many articles should you cite? It’s hard to say. You just have to be thorough. Some topics
have been studied at length, so a proper literature review will have survey 15-30 articles. Other
topics have received little attention, so you can only cite 10 or so articles.
Components
Literature reviews should comprise the following elements:
An overview of the subject, issue or theory under consideration, along with the objectives
of the literature review
Division of works under review into categories (e.g. those in support of a particular
position, those against, and those offering alternative theses entirely)
Explanation of how each work is similar to and how it varies from the others
Conclusions as to which pieces are best considered in their argument, are most
convincing of their opinions, and make the greatest contribution to the understanding and
development of their area of research
The purpose of a literature review is to:
Place each work in the context of its contribution to the understanding of the subject
under review
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Describe the relationship of each work to the others under consideration
Identify areas of prior scholarship to prevent duplication of effort
Point the way forward for further research
Again, please use the articles’ own literature reviews as templates for your own reviews. Don’t
copy, but just follow their style of writing.
Speaking of style of writing: you must write in a professional, academic tone. There is no room
for slang, or even “I will” or “I think”, etc… Follow the writing style of the articles you’ve read.
You’ll find it useful to outline your lit review before you begin writing. This way, you’ll have a
well-defined structure that organizes the papers thematically.
Your first paragraph should briefly introduce the research question, and motivate the reader that
the question is important and worth answering. Make sure you have a thesis statement that
indicates what your research will investigate.
Do not just have one paragraph-per-paper: A said X, B said Y, C agreed with X, and D agreed
with X. I could just read each paper’s abstract for that. Rather, what I need from you, is to help
me relate the papers to each other. Group the papers together in terms of their results, or
approaches, or statistical techniques, or some other such theme that helps your reader understand
the overall outlines of the debate.
If you quote, you must cite the page number. If you have a quote that runs more
than four lines, you must use a “block” quote format. This is where you indent a
half-inch from both the left and the right margins.
Try to conform to the citation style described in the course BlackBoard site, under Course
Materials Literature Review folder.
Google Scholar now has a feature which actually generates properly formatted references in all
the major styles: MLA, APA, and Chicago. Use it!
In your References section, each entry should use a “hanging indent” such as:
Lee, S. H., Levendis, J., & Gutierrez, L. (2012). Telecommunications and economic growth: An
empirical analysis of sub-Saharan Africa. Applied Economics, 44(4), 461-469.
Google how to do this in your specific word processor. The lit review in that paper is pretty
good, btw.
You may also want to read the following:
Denney, Andrew S. and Tewskbury, Richard (2013). How to write a literature review. Journal of
Criminal Justice Education, 24(2): 218-234.
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You should consult the sample paper for formatting, and general writing style. D.
McCloskey’s Economical Writing is a great guide on how to write for an audience of
academic economists. And don’t be afraid to go to the WAC lab for an extra pair of
proofreading eyes.
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GRADING RUBRIC FOR LITERATURE REVIEW
Paper authors:
Criteria and qualities Poor (1)
Good (2)
Excellent (3)
Point Value
Scaling factor
Introduction: the Problem statement
Vague reference is made to the topic to be examined.
Readers are aware of the overall problem or topic to be examined.
The topic is introduced, and its relevance is explained.
5%
Articles: appropriateness of
sources
Information is gathered from limited, dubious, sources.
Information is gathered from a few sources, some of dubious quality.
Information is gathered from multiple, research-based sources.
20%
Articles: appropriateness of
content
Major sections of pertinent content have been neglected or greatly run-on. The topic is of little significance to the field.
Some discussion of broader scholarly literature.
The appropriate content is covered in depth without being redundant. Sources are cited when specific statements are made. Relevance and significance are unquestionable.
10%
Articles: Balanced viewpoint
Presents only one answer to the research question.
Some discussion of alternative viewpoints, but heavily favors one side.
Objective, balanced viewpoint from various perspectives.
10%
Conclusion: Synthesis of
literature's findings and research
question.
There is no indication the author tried to synthesize the information or make a conclusion based on the literature under review. No hypothesis or research question is provided.
The author provides concluding remarks that show an analysis and synthesis of ideas occurred. Some of the conclusions, however, were not supported in the body of the report. The hypothesis or research question is stated.
The author was able to make succinct and precise conclusions based on the review. Insights into the problem are appropriate. Conclusions and the hypothesis or research question are strongly supported in the report.
10%
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Presentation
Grammar Four or more spelling and/or grammatical mistakes per page.
Two or three spelling +/- grammatical mistakes per page.
One or fewer spelling and/or grammatical mistakes per page.
20%
Clarity of writing and writing technique
It is hard to know what the writer is trying to express. Writing is convoluted.
Writing is generally clear, but unnecessary words are occasionally used. Meaning is sometimes hidden. Paragraph or sentence structure is too repetitive.
Writing is crisp, clear, and succinct. The use of pronouns, modifiers, and parallel construction is appropriate.
10%
Coherence and structure
Poorly conceptualized, haphazard. Some coherent structure. Well developed, coherent. 10%
Citation format
Citations for statements included in the report were not present, or references which were included were not found in the text.
Citations within the body of the report and a corresponding reference list were presented. Some formatting problems exist, or components were missing.
All needed citations were included in the report. References matched the citations, and all were encoded in the appropriate format.
5%
Lagniappe
Timeliness Material was submitted more than one class late.
Material was submitted up to one class late.
Material is submitted on time. 10% reduction
per day late
Additional Comments Final Score:
As a percent:
17
The Data Section
Please do not put off working on the data too late. You should consider availability of data
from the beginning of the project.
If your paper is microeconomic in nature, some useful sources of data are:
National Longitudinal Study of Youth
Panel Study of Income Dynamics
Current Population Survey
General Social Survey
Macro data are easier to find. Check out:
World Bank. The Stata command, wbopendata, download this data directly into Stata.
International Monetary Fund
FRED (The Federal Reserve’s database) The Stata command, freduse, downloads this
data directly into Stata.
Penn World Tables. This dataset is very good for cross-country comparisons. You can
also access these data from freduse.
Several macro databases, in Stata format no less, can be accessed through
http://graduateinstitute.ch/md4Stata/datasets.html. This includes the Penn World Tables.
If you download from here, or from wbopendata or freduse, you will not have to
convert your data to Stata format; your life will be easier.
A useful portal to find data is: http://www.oswego.edu/~economic/data.htm. It includes dozens
of links to data sources.
In getting your dataset in order, try to do all your work in one do-file. This do-file should include
everything from loading your original datasets, and the commands for making any alterations to
them.
Some useful commands are:
destring (this command converts a text variable to numeric. This is especially useful
if your data originally came in Excel format, and you copy-and-pasted into Stata.)
xpose (transpose. It rotates your dataset so that columns become rows and rows become
columns)
merge (to splice together two different datasets.)
collapse (helps you calculate averages and sums. For example, you might have data
for 100 countries, each with 10 years. This lets you calculate the 10-year average for each
country.)
reshape (useful if you have panel data and you want to switch between long and wide
format)
Also, Dr. Mehmet Dicle and I wrote a Stata command to simplify some of the tedium of
renaming countries so that they share the same standard names across datasets. You can install
this command by typing into the command line: .net from http://dlacademics.com/Stata