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ECON 141: Econometrics

Spring 2017

January 17, 2017

Instructor and GSI:


• Professor: Demian Pouzo

• Office Hours: W 1:30pm-3:30pm. (Please, send an email to schedule a


precise time).
• Office: Evans Hall 663
• email: dpouzo@econ.berkeley.edu

• GSI: Jose P. Vasquez


• Office Hours: Th 5pm-7pm
• Office: Evans 636

• email: jpvasquez@berkeley.edu

Time and Location:


• Lectures: Tu-Th 11:00am-12:30pm, Kroeber 155.
• Sections:
– 101 DIS: Th 8:00 am - 9:30 am. Valley Life Sciences 2070.
– 102 DIS: Tu 8:00 am - 9:30 am. Location TBD.

Prerequisites
Prerequisites: 100A-100B or 101A-101B or equivalent; Statistics 20, 21, 25, or
131A, or equivalent; and Mathematics 53 and 54, or equivalent.

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Course Description:
The main goal of the course is to give an introduction to some econometric
techniques ranging from the least squares methodology to extensions such as
panel data, instrumental variables and time series analysis.

Learning Goals
The learning goals of this course are: (a) Conduct Statistical Analysis, (b)
understand the role of empirical evidence in evaluating economic problems, and
(c) understand the role of assumptions for the underlying models.

Textbooks:
• Main Textbook:
– James Stock and Mark Watson (2011), Introduction to Econometrics,
3rd Edition, Addison-Wesley, ISBN 0136125085.

• Recommended Textbooks:
– Jeffrey M. Wooldridge (2003), Introductory Econometrics, Thomson/South-
Western.

Course Outline
(SW) stands for James Stock and Mark Watson (2011), Introduction to Econo-
metrics, 3rd Edition, Addison-Wesley, ISBN 0136125085. Topics with (∗) beside
them are tentative, and will be covered if time permits.

1. Introduction to the Course and Statistics Review.


• Random variables; probability functions and distribution functions;
expected value and variance. (SW Ch. 2).
• Relationships between two random variables: marginals, joint, con-
ditional; law of iterated expectations; Correlation and Independence.
(SW Ch. 2).
• Some important probability distributions; the concept of “iid”-ness;
estimators and estimates; sample mean. (SW Ch. 2-3).
• Properties of estimators: bias, variance, Mean Squared Error, con-
sistency, Asymptotic Normality; the Central Limit Theorem. (SW
Ch. 3).
• Hypothesis tests and Confidence Intervals, p-values. (SW Ch. 3).
2. Ordinary Least Squares (OLS):

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• Conditional expectations. Ordinary Least Squares (OLS) with only
one conditioning variable. (SW Ch. 4 and 17).
• The OLS assumptions and properties of the estimators, sampling
distribution. (SW Ch. 4 and 17).
• Tests and confidence intervals, Goodness of Fit and R-squared. (SW
Ch. 4-5 and 17).
• Homoskedasticity vs Heteroskedasticity, Weighted Least Squares (SW
Ch. 5 and 17).
• Omitted variables, introduction to multivariate OLS. (SW Ch. 6).
• Multivariate OLS, Assumptions and Properties. (SW Ch. 6).
• Imperfect multicollinearity, tests and confidence intervals for single
coefficients, goodness of fit and adjusted R-squared. (SW Ch. 6 and
7).
• Testing joint hypotheses (with and without homoskedasticity) (SW
Ch. 7).

3. Nonlinear regression
• Nonlinearities, estimation of elasticities, dummy variables and inter-
actions. (SW Ch. 8).
4. Panel Data

• Linear models and panel data. (SW Ch. 10).


5. Endogeneity
• Endogenous regressors, simultaneity and Instrumental Variables. (SW
Ch. 12).
• Two Stage Least Squares (2SLS). (SW Ch. 12).
• Strength and Exogeneity. (SW Ch. 12).
• Testing for Weak Instruments (∗).
6. An Introduction to Treatment Effect Estimation

7. Time Series Analysis


• Introduction to Time series Regression. (SW Ch. 14).
• Autoregressions. (SW Ch. 14).
• Dynamic Causal Effects. (SW. Ch. 15).
• Vector Autoregressions. (SW. Ch. 16).
• Cointegration (∗). (SW. Ch. 16).
• Autoregressive Conditional Heterosckedasticity (∗). (SW. Ch. 16).

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Grading
• Problem Sets: 10%
• Midterm 1 (tentative date: 02/16): 30%
• Midterm 2 (tentative date: 03/23): 20%
• Final: 40%

Problem sets: Problem sets will not be graded. We will simply record
whether you have turned each one in. We will also drop one, so that if you turn
in all but one, you will receive full credit, and so on. We will not return the
problem sets to you until the end of the term so that, if you are on the border
between grades, we can refer back to them to break ties. This is to give you
some additional incentive to take these assignments seriously.
Problem sets are designed to help you learn how to apply the material pre-
sented in lectures and recitations. You are allowed to work in groups, as long
as each group is comprised of no more than three people and as long as each
member submits their own written answers. Problem sets are turned in at the
beginning of class on the day that they are due; you may e-mail your homework
to the GSI, but put ECON141 in the subject line. Late homework will not be
accepted and there will be no extensions.
Exams: There will be no makeups for the exams. To be considered valid,
a reason for missing the exam must be proffered prior to the exam that is to
be missed, if at all possible, the excuse must be in writing, and it must be
verifiable. These criteria are necessary, not sufficient, however; we reserve the
right to deem an excuse meeting the above criteria invalid.
If you miss a midterm (with a valid reason) the weight of the midterm will be
reallocated to the final exam, regardless of the respective means of the individual
exams. The final exam is comprehensive, so you will be responsible for all the
material covered in this course. The time of the final is set and will not be
moved under any circumstances. Exams will be closed book, but you will not
need to memorize a bunch of formulas.

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