chapter1_econometrics
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What is Econometrics
V c Hong V
University of Economics HCMC
June 2015
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What is Econometrics?
1 Econometrics is based upon the development of statisticalmethods for estimating economic relationships, testing economictheories, and evaluating and implementing government andbusiness policy.
2 forecasting of such important macroeconomics variables asinterest rates, inflation rates, and gross domestic product.
3 Ex: Effects of political campaign expenditure on voting outcome(Expenditure voting outcome)
4 impact of school spending on student performance (schoolspending student performance)
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Example
crime=0+1wagem+ 2othinc+3freqarr+4freqconv+
5avgsen+6age+u, (1)
where
crime=some measure of the frequency of criminal activity,
wagem =the wage that can be earned in legal employment,
othinc=the income from other sources (assets, inheritance, and sofreqarr=the frequency of arrests for prior infractions (to approximat
freqconv=the frequency of conviction, and
avgsen=the average sentence length after conviction
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Example 2.1
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Steps in Econometrics
1 Specify an economic model, then turn it into what we call aneconometric model.
2 Identify function form: f() before undertaking an econometricanalysis.
3 Formulating hypotheses of interest
ex: the wage that can be earned in the legal employment has no
effect on criminal behaviour.
H0 :1 =0
H1 :1 =04 Data collection
5 Empirical analysis.
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Structure of Economic Data
1 Cross-sectional Data (CS): consists of a sample of individuals,households, firms, cities, countries or a variety of other units,taken at a given point in time.
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Structure of Economic Data
1 Cross-sectional Data (CS): consists of a sample of individuals,households, firms, cities, countries or a variety of other units,taken at a given point in time.
2 Time Series Data (TS): consists of observations on a variable orseveral variables over time. Ex: stock-price, money supply.
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Structure of Economic Data
1 Cross-sectional Data (CS): consists of a sample of individuals,households, firms, cities, countries or a variety of other units,taken at a given point in time.
2 Time Series Data (TS): consists of observations on a variable orseveral variables over time. Ex: stock-price, money supply.
3 Pooled Cross Sections: combine between CS and TS. However,it is organized as a stacked CS data over years.
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Structure of Economic Data
1 Cross-sectional Data (CS): consists of a sample of individuals,households, firms, cities, countries or a variety of other units,taken at a given point in time.
2 Time Series Data (TS): consists of observations on a variable orseveral variables over time. Ex: stock-price, money supply.
3 Pooled Cross Sections: combine between CS and TS. However,it is organized as a stacked CS data over years.
4 Panel Data: consists of a time series for each cross-sectionalmember in the dataset.
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A Cross-Sectional Data Set
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Time Series Data Set
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Pooled Cross Sections
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Panel Data Set
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