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ecmt2150.pdf - lOMoARcPSD|5868950 ECMT2150 - . Econometrics...

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StuDocu is not sponsored or endorsed by any college or universityECMT2150 -....Econometrics (University of Sydney)StuDocu is not sponsored or endorsed by any college or universityECMT2150 -....Econometrics (University of Sydney)Downloaded by Sandy Beaches ([email protected])lOMoARcPSD|5868950
ECMT2150WEEK 1 – Intro to EconometricsChapter 11.1 Nature of EconometricsEconometrics: use of statstcal methods to analyse economic dataEconometricians analyse observatonal dataGoals of econometric analyseEstmatng relatonship between economic variables (empirical analyse uses data to test a theory or estmate arelatonship)Testng economic theories and hypothesesForecastng economic variables (macro --> interest rates, infaton rates and GDP)Evaluatng and implementng and government and business policy1.2 Steps in Economic Analysis1.Decide topic and propose economic model (theory) – increasing economies to scale, diminishing marginalreturns?2.Propose corresponding econometric (empirical) model, involves unknow parameters3.Collect appropriate data4.Use sofware to estmate from the data5.Give economic interpretaton to the estmaton resultsEconomic modelsModels of micro (e.g. individuals or frms) or macro (e.g. regions, countries)-Micro (individual consumpton decisions) – subject to budget constraint, leads to premise that these models isutlity maximizaton -> resource constraints -> demand equatons -> forming basis of an econometric analysis ofconsumer demandFormal (derived from frst principles), informal (conceptual frameworks based on economic understanding -common) or a theoretcal (based on intuiton)Ofen uses optmizing behaviour, equilibrium modelingEstablishes relatonships between economic variables“essentally, all models are wrong, but some are useful”Econometrics vs EconomicsEconomics suggests important relatonships with policy implicatons, but never suggests quanttatve magnitudesof casual efectsFunctonal form has to be specifed1.3 Structure of Economic DataCross sectonalSample of individuals, households, frms, cites, states, countries or a variety of other units, taken at a given pointin tme (wages and other characteristcs, growth rates and country characteristcs)Random samplingMore or less independentEncountered in applied microeconomicsTime seriesObservatons on a variable or several variables over tmeE.g. stock prices, money supply, CPI, GDP, annual homicide rates, automobile salesApplied macroeconomics and fnanceDownloaded by Sandy Beaches ([email protected])lOMoARcPSD|5868950
ECMT2150Pooled Cross SectonTwo or more cross sectons are combined in one data setCross sectons are drawn independently of each other (e.g. implies individuals/frms will difer in each cross-secton)Used to evaluate policy changes-Efect of change in property taxes on house prices-Random sample of house prices for the year 1993-New random sample of house prices for the year 1995-Before and afer reformPanelSame cross-sectonal units are followed over tme e.g. city crime statstcs observed in two yearsHave both cross-sectonal and tme series dimensionsUsed to account for tme-invariant unobservableUsed to model lagged responses (efect of police on crime rates may exhibit tme lag)1.4 Causality and noton of ceteris paribusDefniton of causal efect of x on y-How does the variable y change if variable x is changed, holding all other relevant factors constant?

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