A Modern Approach to Teaching Econometrics D.F.HENDRY B.NIELSEN 2010

A Modern Approach to Teaching Econometrics D.F.HENDRY B.NIELSEN 2010

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Unformatted text preview: EUROPEAN JOURNAL OF PURE AND APPLIED MATHEMATICS Vol. 3, No. 3, 2010, 347-369 ISSN 1307-5543 – www.ejpam.com S PECIAL ISSUE ON G RANGER ECONOMETRICS AND STATISTICAL MODELING DEDICATED TO THE MEMORY OF PROF. SIR CLIVE W.J. GRANGER A Modern Approach to Teaching Econometrics David F. Hendry ∗ and Bent Nielsen Economics Department, Oxford University Abstract. We explain the computer-based approach to the teaching of econometrics used in Oxford from the elementary to the advanced. The aims are to enable students to critically evaluate published applied studies and to undertake empirical research in economics. The unified theoretical framework is that of likelihood, using likelihood-ratio tests for inference and evaluation, and focusing on develop- ing well-specified empirical models of interesting economic issues. A sequence of increasingly realistic models is developed from independent, identically distributed binary data through to selecting cointe- grated equations in the face of structural breaks–in a one-year course. 2000 Mathematics Subject Classifications : 62E01, 62E07 Key Words and Phrases : Clive Granger; Teaching Econometrics; model evaluation; likelihood; struc- tural breaks Preface by David Hendry Although my first interchanges with Clive Granger involved disagreements over modeling non-stationary economic time series, that stimulus led to his famous formulation of the con- cept of cointegration, and associated developments in econometric modeling (see [ 20, 34 ] , and http://nobelprize.org/nobel_prizes/economics/laureates/2003/granger-lecture.pdf , based on [ 13 ] , and [ 7 ] ). Clive was already well known both for his ideas on causality [ 12 ] , appraised in [ 26 ] , and distinguished from exogeneity in [ 8 ] ), and for re-emphasizing the dangers in applying static regression models to integrated data (in [ 16 ] , following pio- neering research by [ 38 ] ). From my first visit to the University of California at San Diego in 1975, where Clive had moved in 1974, our friendship blossomed, built around a common ∗ Corresponding author. Email address: david.hendry@nuffield.ox.ac.uk (D. Hendry) bent.nielsen@nuffield.ox.ac.uk (B. Nielsen) http: // www.ejpam.com 347 c ⃝ 2010 EJPAM All rights reserved. D. Hendry and B. Nielsen / Eur. J. Pure Appl. Math, 3 (2010), 347-369 348 desire to improve the quality of econometric model building, especially by a better match to the empirical evidence: Clive’s contributions to doing so have been one of the most successful research programmes in econometrics, and are a lasting contribution (for formal Obituaries, see [ 29 ] , and [ 28 ] ). My own approach focused on implementing modeling methods, and led to our only joint publication [ 14 ] , discussing automatic modeling. Clive also kept the theory of economic forecasting under the spotlight when it was not in fashion [ see 15, 17 ] , another interest we had in common (including our accidentally adopting the same title in [ 3 ] ). In addition to his astonishing creativity and innovative ideas, Clive was a master of written and...
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This note was uploaded on 02/21/2012 for the course ECON 505 taught by Professor Penrose during the Spring '11 term at Boğaziçi University.

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A Modern Approach to Teaching Econometrics D.F.HENDRY B.NIELSEN 2010

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