Lecture 1

Lecture 1 - LECTURE 1: INTRODUCTION What is Econometrics?...

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LECTURE 1: INTRODUCTION What is Econometrics ? Application of statistical methods for analyzing and predicting economic phenomena: o Quantifying (estimating) relationships among economic variables o Testing economic theories o Evaluating government and business economic policies o Forecasting micro - and macro - economic variables Economics suggests important relationships, often with policy implications, but virtually never suggests quantitative magnitudes of causal effects. For example: What is the quantitative effect of reducing class size on student achievement? How does another year of education change earnings? What is the price elasticity of cigarettes? What is the effect on output growth of a 1-percentage point increase in interest rates by the Fed? What is the effect on housing prices of environmental improvements? We use Econometrics for empirical analysis in every branch of applied economics (labor, industrial economics, macroeconomics, marketing, economic development, financial economics) Using Data to Measure Causal Effects : Ideally, we would like an experiment but almost always in economics we only have observational (non-experimental) data. What would be an experiment to estimate the effect of class size on standardized test scores? Most of the course deals with difficulties arising from using observational data to estimate causal effects In this course you will : Learn methods for estimating causal effects using observational data; Learn some tools that can be used for other purposes, for example forecasting using time series data; Focus on applications – theory is used only as needed to understand the “why’s” of the
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Lecture 1 - LECTURE 1: INTRODUCTION What is Econometrics?...

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