Econometrics eBook

This book is intended for a first year graduate course in econometrics. However, the first six chapters have no matrix algebra and can be used in an advanced undergraduate class. This can be supplemented by some of the material in later chapters that do not require matrix algebra, like the first part of Chapter lIon simultaneous equations and Chapter 14 on time-series analysis. This book teaches some of the basic econometric methods and the underlying assumptions behind them. Estimation, hypotheses testing and prediction are three recurrent themes in this book. Some uses of econometric methods include (i) empirical testing of economic theory, whether it is the permanent income consumption theory or purchasing power parity, (ii) forecasting, whether it is GNP or unemployment in the U.S. economy or future sales in the computer industry. (iii) Estimation of price elasticities of demand, or returns to scale in production. More importantly, econometric methods can be used to simulate the effect of policy changes like a tax increase on gasoline consumption, or a ban on advertising on cigarette consumption. It is left to the reader to choose among the available econometric software to use, like TSP, SHAZAM, PcGive, HUMMER, LIMDEP, SAS, STATA, GAUSS and EViews. The empirical illustrations in the book utilize a variety of these software packages. Of course, these packages have different advantages and disadvantages.