This
is an introduction to modeling time series data. The prerequisites are mathematical
economics (Econ 331), or math through multivariable calculus, and econometrics
or mathematical statistics.
James
D. Hamilton, Time Series Analysis (QA 280.H264 1994)
David F. Hendry, Dynamic Econometrics (HB 141.H458 1995)
These
are the sources of my course notes. I do not recommend buying either book.
Other readings are available from the Blackboard site:
Johnston and DiNardo, Econometric Methods, Fourth Edition (J&D).
Maddala, G.S., Introduction to Econometrics,
Second Edition (M).
Moody, Basic Econometrics with Stata (BES)
Grading
|
Forecasting test |
20% |
|
Homework |
20% |
|
Modeling test |
20% |
|
Term paper |
40% |
|
There is no final exam. |
|
All homework assignments must be completed on time.
Grading scale: A 90-100, B 80-89, C 70-79, D 60-69. Numerical grades are rounded up.
Complex
numbers
Circular functions
DeMoivre's Theorem
Dynamic
multipliers (P&R 413-431)
Eigenvalues (Johnston, J. "The Eigenvalue Problem")
Stability conditions: roots inside the unit circle
Lag
polynomials
Stability conditions: roots outside the unit circle
Stationary
ARMA processes
White noise
Covariance stationarity
MA(q) processes
AR(p) processes
a.
Identification
b. Estimation
c. Forecasting
Assignment:
forecasting
VAR's
and reduced form equations
Matrix notation
Stability conditions
Impulse response functions
Hypothesis tests
Granger causality tests (P&R 216-7; M, 393-4)
Assignment: VAR (crime and punishment)
Trend
Stationary vs Difference Stationary Models (M, 258-264)
Persistence of shocks
Dickey-Fuller tests (P&R 507-513; M 582-588; J&D 215-228; BES Ch. 15,
16)
Assignment: Diebold and Senhadh, "The Uncertain
Unit Root in Real GNP: Comment," American Economic Review, 86,
1996, 1291-98.
Assignment: Lothian and Taylor "Real Exchange Rate Behavior: The Recent
Float from the Perspective of the Past Two Centuries," Journal of
Political Economy 104, 1996, 488-509.
Is Crime a Random Walk?
Cointegration and long term equilibria
(Granger, "Introduction." from Engle, R.F. and
Granger, C.W.J., Long Run Economic Relationships,
Oxford University Press, 1991.)
Tests for cointegration (P&R 513-516; M, 588-600; J&D 301-305)
Enders, W. "Characteristic Roots, Rank, and
Cointegration." 385-405.
Estimating the cointegration vector (dynamic ordinary least squares)
Assignment: Warner, "Does world investment demand determine U.S.
imports?" American Economic Review, 84, 1994, 1409-1422.
Assignment: Demand for money in the US, Stock and Watson, "A simple Extimator of Cointegrating Vectors in Higher Order
Integrated Systems," Econometrica, 61, 783-820,
1993. Read section 7 (Stock&Watson.pdf).
Levels
of knowledge (ch 1)
Econometric Concepts (ch 2)
Nonsense regressions and spurious detrending (ch 4)
Exogeneity (ch 5)
Typology of linear dynamic models (ch 7)
Dynamic systems (ch 8)
Theory of reduction (ch 9)
Simultaneous equations (ch 11)
Encompassing (ch 14)
Modeling issues (ch 15)
Example: demand for money in the U.K.(ch 16)
Hendry and Ericsson, "An econometric analysis of U.K. money demand in
monetary trends in the
United States and theUnited
Kingdom by Milton Friedman and Anna J. Schwartz."
American Economic Review 81, March 1991, 8-49.
Granger, C.W.J. "Where are the Controversies in Econometric
Methodology?"
(From Granger, C.W.J. Modelling Economic Time Series,
Oxford: Oxord University Press, 1990.
Pagan, A.R. "Three Econometric Methodologies: A Critical Appraisal."
(From Granger, C.W.J. Modelling Economic Time Series,
Oxford: Oxord University Press, 1990.
"Professor Hendry's Econometric Methodology."
(From Granger, C.W.J. Modelling Economic Time Series,
Oxford: Oxord University Press, 1990.
Review and integration with mainstream econometrics: Johnston & Dinardo, 244-265.
Fixed effects model
Panel unit root tests
Panel cointegration tests