ECON 30130

1. ECON 30130 Applied Econometrics 1 Vincent Hogan

2. Introduction & Outline • Introduce me • Lectures and Labs • Course material • Course outline and objectives

3. Me • Vincent Hogan • vincent.hogan@ucd.ie •  (716) 8300 • Room D205, Newman Building • Office Hours: Mon 10am-12 noon or by appointment

4. Lectures and Labs • Lectures: Tues & Thurs 10-11 Theatre Q. • Labs • Several locations and times • Tues 17.00-1900 D114 & D115 HEA • Wed 17.00-19.00 G5 DAE • Thurs 18.00-20.00 G5 & G6 DAE • Labs start in week 2 (tbc)

5. Role of Labs • Labs are NOT tutorials in the traditional sense. • The scheduled labs are merely times where the computer labs are reserved for your use exclusively • AND where there will be some support for using the course software provided by Phd Students • You are not obliged to attend labs but Econometrics is a practical subject so you need to practice either in the supervised labs or on your own

6. Course Software • Econometrics is a practical subject that involves the analysis of real world data • We will use software called stata which can be accessed via “Software for U” on the UCD connect.

7. Using Stata • Vital to get comfortable with basics in stata • Lots of online help for stata • Practice its use in the labs where the grad students can help you • Stata will be needed for assignments • Understanding the output will be key for class and the final exam • I will post videos on basic tasks

8. Course Website • The course material will be available at www.vincenthogan.ie • Material will be posted in blog form • Course notes • Example data • Stata command files • Software manuals • Sample exams • Videos of stata • The blackboard site for this course contains the lecture material from previous years. • Not of much relevance

9. Course Material • You are strongly advised to bring a printed copy of these notes to the lecture to enable you to follow the material.  • These notes are not designed to be sufficient on their own. • The recommended text book is • Introductory Econometrics by Jeffrey Wooldridge • Should be in the campus bookshop • Second hand copies should be fine

10. Alternative Texts • All of these texts should be fine and maybe available second hand • “Basic Econometrics”, DamodarGujurati, McGraw-Hill • Introduction to Econometrics” by James Stock and Mark Watson, • Modern Econometrics: an introduction”, R L Thomas, Addison-Wesley, • “Introduction to Econometrics”, G.S Maddala, Prentice Hall, • “A Guide to Econometrics”, Peter Kennedy, Blackwell, • “Learning and Practising Econometrics”, Griffith Hill and Judge, John Wiley.

11. Assessment • Assessment will be based on • 2 pieces of assessed work each worth 15% of the course grade • An end of year exam worth 70% • The projects will involve applying the methods of class to real world data which I will provide. • due at end of week 8 and week 10 • In addition there will be an assignment every week for practice i.e. not for grade • The final exam will be slightly more theoretical but will still have a large practical component • NB: Economics grade scale is different from much of the rest of UCD but the same as maths

12. Economics Grade Scale

13. Introduction to Econometrics • What is econometrics? • Learning objectives • Method of teaching.

14. What is Econometrics • In a nutshell Econometrics is statistics applied to economic relationships • quantifyeconomic relationships • A simple example: • Keynesian Consumption function •  income today,  consumption today or  savings today • C=a+b*Y • Another Example Return to Education: • What is  in income from holding a degree

15. Demand for fuel: • response of consumer demand to change in excise tax? • How much matters to the government

16. Key Issue: Managing Uncertainty • Economic Theory defines a relationship between variables • Agents require the size of the effects e.g. MPC, elasticity of demands. • Key issue: • Whole population never observed only sample • Creates uncertainty • Managing uncertainty is the key point of statistics

17. Steps in the Analysis • Economic Model: state theory or hypothesis e.g. Keynesian model • Specify a mathematical model: single equation or several. • e.g. C=a+b*Y • Note: 1 & 2 from your other courses • Specify statistical model: how deal with “errors” caused by sampling • This is what makes statistics • Get data: I provide for this course • But for your own project you will need to get data

18. Steps in the Analysis • Estimate the parameters of the model that best fit to the data. e.g. what “b” gives the best fit • Reject the Model? • Test hypotheses regarding the parameters. e.g. is “b” = 0.8? • Not trivial because of sample • Prediction: “What if” • implicit in everything

19. Learning Objectives • Understand how to perform linear regression analysis of economic data to derives estimates of parameters defined by economic theory • Understand how to perform hypothesis tests on the regression results in order to reject (or not) alternative economic theories • Use the results of the analyses to describe the effects of alternative economic policies and actions

20. Teaching This Course • Practical approach • Each section will be motivated by a case study • We will analyse real data in class • Address theoretical issues as they arise in each case study • Apply to some other cases • Further applications as homework • You should repeat the data analysis in your own time and do the assignments for practice • Remember only 2 are for grade

21. Teaching This Course • Failure to actually use data yourself will inhibit your learning • Remember 40% of final exam is based on practical interpretation of stata output

22. Cases & Topics • Are women paid less than men? • Intro to statistics • What is the MPC? • Simple regression • How low will house prices fall? • Multivariate regression • What is trade-off between inflation and Unemployment? • Properties of OLS • How do Lawyers set fees?

23. Cases & Topics • Heteroscedastcity and Consumption. • Serial Correlation • Multicolinearity and Omitted variables • Supply and Demand: Simultaneous equations