Lecture 0 - Moshe Buchinsky Department of Economics UCLA...

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Moshe Buchinsky Economics 103 Department of Economics Introduction to Econometrics UCLA Fall, 2011 Lecture Note 0 Motivation–Why do we need it? What will we do today? We will look at several phenomena and problems before even mentioning the word "Ec .... " You’ll see that we have limited ability to digest complicated information When all is said and done we need some systematic method for summarizing and processing the information provided by the available data The framework with which we do it happens to be called econometrics. It generally applies to ALL empirical work in economics The Housing Market Figure 1 How do we de fi ne recession ? A recession, determined by the National Bureau of Economic Research (NBER), is de fi ned to be the period from peak to trough of a business cycle 1
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During a recession unemployment goes up, while starts of new houses go down Note that when we get out of a recession, reduction in unemployment lags the starts of new housing units Figure 2 What else is relevant for the housing market? Vacancy rate goes way up during a recession, especially in the most recent recession Note the huge changes in vacancy rates Generally, when vacancy rates increase new starts decreases Is that the direction of causality? 2
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Figure 3 This is a long series over time (time series) of home ownership Generally there are swings that happen during recessions However, here we see for most of the period a general upward trend Recently home ownership has started going down. Will it go to its historical level of about 64% ? ...? We’ll see ... 3
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Figure 4 What exactly happen in the construction industry?
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