Econometrics: A Mathematical Approach

Description of Course Goals and Curriculum

This course is an introductory course to the field of econometrics. Econometrics is the application of statistics to the discipline of economics. Econometrics forms the foundation for any empirical work in the field of economics. This class is the math-intensive version of ECO 302. ECO 302 and ECO 312 cover very similar material, but ECO 312 presumes that students are comfortable with mathematical proofs and reasoning using linear algebra and statistics. This class covers the mathematical foundation for applied economics. Applications of this material appear in the subsequent spring course, ECO 313 – Econometric Applications. In the process of teaching econometrics, this course also provides students with an introduction to the programming language STATA. The topics covered in the course are as follows:

• Single variable linear regression
• Multivariable linear regression
• Binary choice models
• Instrumental variables
• Panel data
• Time series

Learning From Classroom Instruction

This course comprises of two lectures and one precept each week. Lecture motivates the material and provides mathematical proof for econometric techniques. Lecture also serves to cover broad concepts within the field of econometrics. Students are permitted to ask questions about these concepts during lecture. Often lecture can present mathematics that is a bit sophisticated for those with limited experience in linear algebra or statistics. The point of much of the material in lecture is not to present information that will need to be memorized on the exam but rather to provide mathematical justification for the tools that are presented. As a result, it is more important to take time outside of lecture to review linear algebra and statistics than to memorize lecture material or take exact notes. Precept provides students with an opportunity to work on problems that are covered in the homework and on the exams. Students are encouraged to ask their preceptors questions about the material, both conceptually and regarding practice problems. Practice problems presented in precept are quite useful for learning econometric applications and for preparing for the exams. It is a good idea to ask the preceptor for additional practice problems from the textbook if one seeks more practice material. Preceptors are available outside of class during weekly office hours.

Learning For and From Assignments

Students are assigned weekly problem sets, one midterm, and one final. The weekly problem sets include short problems similar to exam questions as well as longer, data intensive problems that require computational software. The computational software that is recommended that students use is STATA. Preceptors are very familiar with STATA and are recommended as a resource. Questions that do not rely on software are often designed to be more conceptual. Understanding the motivation behind problem set questions is a great way to help understand the material. Excluding STATA material, problem set questions are very similar to exam questions. Students could additionally prepare for exam questions by taking posted practice exams, which are in fact exams from previous years.

External Resources

The internet is a wonderful resource for learning STATA programming. Specifically, STATA has online manuals that explain code functions. One can also look up code functions by typing “help” in the STATA program. In addition, students are encouraged to search the internet for examples of implementation of STATA. Stack Exchange and YouTube are particularly useful. The textbook used for the course is Stock & Watson’s Introduction to Econometrics. This book should be consulted before reviewing lecture material, as the textbook provides several examples and is often mathematically simpler than the lecture notes.

What Students Should Know About This Course For Purposes Of Course Selection

Students should select this course if they are interested in learning statistics and econometrics at a mathematically sophisticated level or if they seek to study advanced topics in economics. Students should not take this course if they find mathematical proof unhelpful or uninteresting, as ECO 302 would be the more appropriate course in that case. This class (or ECO 302) and ECO 313 are probably the most useful economics courses that one could take in preparation for doing junior independent work in applied economics. As a result, it might be advantageous for students majoring in economics to take this course during sophomore year, as it is only offered in the fall, even though many, if not most students in the class, take it in the fall of their junior year. ECO 312 is a useful course for not only economics majors but also students studying other social sciences. ECO 312 also counts towards the Statistics and Machine Learning certificate.