EViews 10 Tutorial

by Manfred W. Keil

to Accompany

Introduction to Econometrics
by James H. Stock and Mark W. Watson

---------------------------------------------------------------------------------------------------------------------

1. EVIEWS: INTRODUCTION ………………….. 1

2. CROSS-SECTIONAL DATA
Interactive Use: Data Input and Simple Data Analysis ………………….. 3

a) The Easy but Tedious Way: Manual Data Entry ………………….. 4

b) Summary Statistics ………………….. 7
c) Graphical Presentations ………………….. 9
d) Simple Regression ………………….12
e) Entering Data from a Spreadsheet ………………….14
f) Importing Data Files directly into EViews ………………….16
g) Data Transformations ………………….20
h) Multiple Regression Model ………………….17

Batch Files …………………..22

3. TIME SERIES DATA …………………..24

4. SUMMARY OF FREQUENTLY USED EVIEWS COMMANDS ……………...26

5. FINAL NOTE ……………...28

---------------------------------------------------------------------------------------------------------------------
1. EViews: INTRODUCTION

This tutorial will introduce you to a statistical and econometric software package called EViews.
The most current professional version is EViews 10 and all output in this tutorial was created
using EViews 10. However there is an EViews Student Version Lite that is free for university
students, with a license that expires after one year. Then there is a EViews University Edition for
$49.95 with a 6-months license. Both EViews 10 and 9 are sufficiently similar that those who
have access to EViews 9 can comfortably use this tutorial. The difference is only apparent in
more advanced techniques that you, as a first time user, will not encounter in a course of
econometrics (or at least not in the beginning of the course).

EViews runs on the Windows (Vista, or Windows 7, 8, 10), and on a Mac platform (OS X. 10,
OS X. 12 or OS X. 13). It is produced by IHS Inc in Irvine, California. You can read about
various product information at the firm’s Web site, www.eviews.com . EViews 10 no longer
comes with a hard copy of the four manuals, a User’s Guide (2 books), a Command Reference,
and an Object Reference book. The manuals can be accessed within the program through the
Help function. You can order EViews by calling (949) 856-3368 or writing to
[email protected]. The User’s Guide is better for first-time users.

The difference between the free student version and the full version is in the limitation on the
size of data sets (“capacity limitation” is 1,500 observations for each series and no more than
15,000 observations for all series; students can work with larger data sets but will then not be
able to save/export the workfile) and the availability of some features such as advanced seasonal
adjustment methods (X11, X12, X13). Furthermore, and perhaps most importantly for you right
now, the student version does not allow you to run EViews in “batch mode” using Program-
Files. Instead you can only use the interactive use. This tutorial will explain the difference
between interactive use and batch mode below. Once you have gone through the first series of
commands in interactive mode, you will almost certainly want to run programs in batch mode.

Econometrics deals with three types of data: cross-sectional data, time series data, and panel
(longitudinal) data (see Chapter 1 of the Stock and Watson (2018) textbook). In a time series you
observe the behavior of a single entity over multiple time periods. This can range from high
frequency data such as financial data (hours, days); to data observed at somewhat lower
(monthly) frequencies, such as industrial production, inflation, and unemployment rates; to
quarterly data (GDP) or annual (historical) data. In a cross-section you analyze data from
multiple entities at a single point in time. One big difference between time series and cross-
sectional analysis is that the order of the observation numbers does not matter in cross-sections.
With time series, you would lose some of the most interesting features of the data if you shuffled
the observations. Finally, panel data can be viewed as a combination of time series and cross-
sectional data, since multiple entities are observed at multiple time periods. EViews allows you to
work with all three types of data.

EViews is most commonly used for time series analysis in academics, business, and government,
but you can work with it easily when you have cross-sections and/or panel data. EViews allows
you to save results within a program and to “retrieve” these results for further calculations later.

1
Remember how you calculated confidence intervals in statistics say for a population mean?
Basically you needed the sample mean, the standard deviation, and some value from a statistical
table. In EViews you can calculate the mean and standard deviation of a sample and then
temporarily “store” these. You then work with these numbers in a standard formula for
confidence intervals. In addition, EViews provides the required numbers from the relevant
distribution (normal,  2 , F, etc.).

While EViews is truly interactive, you can also run a program as a “batch” job, i.e., you write a
sequence of commands and then execute the program in one go. In the good old days the
equivalent was to submit a “batch” of cards, each containing a single command, to a technician,
who would use a card reader to enter these into the computer, and the computer would then
execute the sequence of statements. (You stored this batch of cards typically in a filing cabinet,
and the deck was referred to as a “file.”) While you will work at first in interactive mode by
clicking on buttons, you will very soon discover the advantage of running your regressions in
batch mode. This method allows you to see the history of commands, and you can also analyze
where exactly things went wrong if there are problems with any of your commands. This tutorial
will initially explain the interactive use of EViews, since it is more intuitive. However, we will
switch as soon as it makes sense into the batch mode.1

While EViews produces graphs and charts, these can often be improved upon by saving the data
used in these graphs in a spreadsheet or ASCII format, and then to import the data into Excel (or
another spreadsheet program you prefer). Even better, since EViews works in a Windows format,
it allows you to cut and paste the data into any other Windows-based program.

Finally, there is a warning about the limitations of this tutorial. The purpose is to help you gain
an initial understanding of how to work with EViews. I hope that the tutorial looks less daunting
than the manuals. However, it cannot replace the accompanying manuals, which you will have to
consult for more detailed questions (alternatively use “Help” in the program). Feel free to
provide me with feedback of how we can improve the tutorial for future generations of students
([email protected]). Colleagues of mine and I have decided to set up a “Wiki” run by students but
supervised by faculty at my academic institution. We have found that the “wisdom of crowds”
often produces very valuable information for those who follow. This is, of course, just a
suggestion. Finally you may want to think about working with statistical software as learning a
new language: practicing it routinely will result in improvement. If you set it aside for too long,
you will only remember the most important lines but will forget the important details. Another
danger of tutorials like this is that you simply follow the instructions and when you are done, you
don’t remember the commands. It is therefore a good idea to keep a separate sheet and to write
down commands and examples of them if you think you will use them later on. I will give you
short exercises so that you can practice the commands on your own.

1 As mentioned above, the very reasonably priced student version does not run batch files. However, even if you
purchased the student version, the academic version may be available to you at your college/university, or you may
decide to upgrade on your own.

2
2. CROS
SS-SECTIO
ONAL DATA
A

Interactiive Use: Datta Input and Simple Dataa Analysis

Let’s gett started. Cllick on the EViews icon n to begin yyour sessionn. What youu see next iis the
EViews window,
w witth the title bar
b at the topp, the comm mand windoww immediateely below annd the
ne at the very
status lin y bottom (ign nore my path
h, etc., below
w).

The resuults of your various

v operrations will be
b displayedd between thhe commandd window annd the
status lin
ne in the so-called wo ork area. In I interactivve use, EViiews allows you to exxecute
command ds either by clicking on command buttons
b or byy typing the eequivalent ccommand intto the
command d window. To view passt commandss, click on thhe “capture”” button, located to the left of
the commmand button.

In this tu
utorial, we will
w work with
w two datta applicatioons, two crooss-sectional (Californiaa Test
Score Daata Set used in chapters 4-9; Currentt Populationn Survey Datta Set used iin Chapters 3 and
8), and one time seriees (U.S. Maccro Quarterly Data Set uused in Chappter 15 ).

3
a) The Ea
asy but Tediious Way: Manual
M Data Entry

In Chaptters 4 to 9 you will wo ork with thee Californiaa Test Scoree Data Set. These are ccross-
sectionall data, referrred to in EViiews as “und dated or irreegular” dataa. There are 420 observaations
from K-66 and K-8 scchool districtts for the yeaars 1998 andd 1999. You will not wannt to enter a large
amount of
o data manu ually, unless you have co ollected dataa by yoursellf (somethingg that econoomists
are doing
g more and more).
m The alternative
a iss to enter thee data into a spreadsheett (Excel) andd then
to cut an
nd paste the data (see below). How wever, for the purpose oof this introdduction it w will be
useful th
hat you becom a editing, data. Here I will use a ssub-sample of 10
me aware off entering, and
observatiions from the California Test Score Data D Set.

To start, we must crreate a workf

kfile in EView
ws. Click onn the File ppull-down mmenu, and theen on
New and d Workfile. As
A is commo on in Windoows programms, you will ssee a dialog box.

This partticular dialog

g box asks you
y for the sttart and end dates of youur data set, annd for the tyype of
data you are entering g. We are working
w with
h undated orr irregular ddata (cross seectional dataa), so
use the pull-down
p meenu for Worrkfile Structture Type aand select Un nstructured d/Undated. Then
enter 10 in the Obserrvations box x. While you
u are at it, ennter “SW10ssmpl” into thhe “WF” fielld.

4
You willl see a workffile window,, which conttains two enttries (c, resiid). Do not w
worry about these
for the moment.
m To enter the daata into a fo
ormat similaar to the sprreadsheets yyou have become
familiar with,
w click on
o Quick in the
t title bar, and then onn Empty Grroup (Edit S Series).

5
Next entter the data for two vaariables (two o columns). Here are thhe 10 obserrvations to eenter.
(EViews will add zerros. You willl see later ho
ow to get ridd of these.)

obs TE
ESTSCR STR

1 606.8 19.5
2 631.1 20.1
3 631.4 21.5
4 631.8 20.1
5 631.9 20.4
6 632.0 22.4
7 632.0 22.9
8 638.5 19.1
9 638.7 20.2
10 639.3 19.7

Once you have enteered the dataa, close the object (clicck on “X”) (you will bbe asked “DDelete
Untitled GROUP ?”” Click on “Yes.”)
“ Youu will be abble to (re)naame the variiables. Clicck on
SER01, then rightcllick and cho
ose “Renamee…” and ennter “testscrr”. Do the same to chhange
SER02 too “str”.

Entering data in thiss way is very

y tedious, and you will make data input errorss frequently.. You

6
will see below
b how tot enter data directly fromm a spreadshheet or an A ASCII file, w
which are the most
common forms of daata you will receive
r in the future. Alsso, you noticced when yoou entered thhe test
score (testscr) first and
a then thee student-teaacher ratio ((str) that youu were autoomatically m moved
into the test
t score co olumn after entering eacch student-teeacher data point. This is an unfortuunate
feature, but
b there is non alternativee unless youu enter all thee data by observation.

In generaal, you can lo

ook at variab
bles in your workfile by typing in thhe command

Show varna
ame1, varna me2, …

where va
arnamei referrs to a variab
ble that existts in your woorkfile. Try it here by tyyping

show
w testscr strr

You shou
uld see the following:
fo

b) Summary Statisticcs

For the moment,

m let’s just see iff we are workking with thhe same dataa set. Locatee the View bbutton
at the up
pper-left cornner of the Group
G windoow, click onn it, and thenn click on D
Descriptive Stats
and Com mmon samplle. You sho ould see the following ouutput (insteaad of using P
Prnt Scrn oon my
computerr, I pressed the Freeze button
b in EV
Views. This allows me tto copy and paste outpuut into

7
another Windows based program, a feature that will come in handy down the road when you
want to display some of your output):
Date: 11/01/18
Time: 13:35
Sample: 1 10

TESTSCR STR

Mean 631.3500 20.59000

Median 631.9500 20.15000
Maximum 639.3000 22.90000
Minimum 606.8000 19.10000
Std. Dev. 9.264418 1.260908
Skewness -1.992947 0.782889
Kurtosis 6.247292 2.295517

Jarque-Bera 11.01344 1.228314

Probability 0.004059 0.541097

Sum 6313.500 205.9000

Sum Sq. Dev. 772.4650 14.30900

Observations 10 10

The summary statistics are explained in Chapter 2 of your textbook (for example, Kurtosis is
defined in equation (2.15) on page 22 in Stock and Watson (2018).

If your summary statistics differ, then check the data again. (To return to the data observations,
either click on View and then choose Spread Sheet, or simply click on the Sheet button). Once
you have located the data problem, click the Edit+/- button on the workfile toolbar, move to the
observation in question, enter the correct value, and press Enter. You may want to explore some
of the other toolbar buttons to see their functions. CellFmt, for example, allows you to get rid of
unnecessary digits after the decimal point, but appears only after you “Freeze” the object and
click Edit +/-.

Once you have entered the data, there are various things you can do with it. You may want to
keep a hard copy of what you just entered. If so, click on the Print button.

In general, it is a good idea to save the data and your work frequently in some form. Many of us
have learned through painful experiences how easy it is to lose hours of work by not backing up
data/results in some fashion. There are two ways to save data in EViews. One is to save an entire
workfile (Save), and the other is to store individual series (Store).

Press the Save button in the workfile toolbar (the window displaying the variable names), or
click on File and then SaveAs in the main menu. Follow the usual Windows format for saving
files (drives, directories, file type, etc.). If you save workfiles in EViews readable format, then
you should use the extension “.WF1.” Once you have saved a workfile, you can call it up the
next time you intend to use it by clicking on File and then Open. Try these operations by saving

8
the current workfile under the name “SW10smpl.wf1.”

Alternatively, you may want to just save a few series of the current workfile. The reason is that
sometimes you use some of these original series, or transformations of these series, in a different
workfile. Let’s save the test score and student-teacher series. First mark the two series in the
workfile by clicking on testscr, then hold down the control or shift button and click on str. (Make
sure that you are doing this in the Workfile window, not in the Group View window.) After that,
press the Store button in the workfile toolbar. Once again, a dialog box will pop up. Store the
two data series in the EViews subdirectory with the extension “.db.” Next time you need to
retrieve these two series, you can simply click on the Fetch button in the workfile toolbar.

c) Graphical Presentations

Most often it is a good idea to generate graphs (figures or “pictures”) to get some “feel” for the
data. You will be able to detect outliers which may be the result of data entry errors or you will
be able to see if the data “makes sense.” Although EViews offers many graphing options, there
are two that you will use most often: line graphs, where one or more variables are plotted across
entities (these will become more important in time series analysis when you are plotting over
time), and scatterplots (crossplots), where one variable is graphed against another.

First set the sample to 1-10 either by clicking on the Sample button in the workfile toolbar and
typing in “1 10” under Sample range pairs or by entering “smpl 1 10” in the command window.
(The command window is the white box located directly under the main menu and is where you
will type all commands.2) Then type, in the next line, the command “freeze(graph_str) str.line”
in the command line.3 This will create the line graph and give it a name (graph_str here, but
other names, such as graph_1 or mygraph, can be chosen instead). Think of freezing an object as
taking a photograph of it and giving it a name. This allows you to locate it easily in your photo
album later. You can also edit the photograph later. Most importantly, you can cut and paste it
into your word-processing program. “graph_str” now appears in the workfile window. Double
click on it to see the graph you just created. In the future and when in interactive use, you will
most often work in the command window rather than clicking on buttons.

After the graph appears, either double click on the graph or click on the Options button, and
alter it until it looks like the one below. Some of the alterations can be made in the resulting
dialog box; others, such as text inserted, title of the graph, etc., have to be edited in.

2
Make sure you press enter after each command line for the program to register it. If you make a typo, you can go
back and correct your mistake, but be sure to press enter again for the computer to read the command. When typing
commands, be careful where you put spaces, because the computer is sensitive to these and “freeze(graph)” is not
the same as “freeze (graph)”. Oftentimes, the underscore “_” is used in a saved variable name in place of an actual
space.
3
Alternatively the same graph can be generated by marking the variable str first and then double clicking on it. In
the resulting Series window, click on View /Graph/Line&Symbol. You can then freeze the graph by clicking on
the Freeze button.

9
 Graph 1
Student-Teacher Ratio Across 10 School Districts
24

23

Student-T e acher R atio

22

21

20

19

18
1 2 3 4 5 6 7 8 9 10

School District

Typically we are interested either in causal relationships between variables or in the ability of
one variable to predict (later, in time series, forecast) another, it is a good idea to plot two
variables together. Commands, such as line, can often be modified by an option in parentheses.
In this case, “m” means “display multiple graphs.” Use the line command to generate the graph
below.4 This will require you first to define or create a “group” by giving it a name (here
size_perform but others, such as mygroup are possible). Next you tell the program which series
form the group, here str and testscr. Then “freeze” the graph as before.

The line commands are

group size_perform str testscr

freeze(two_series_plot) size_perform.line(m)

You should see the following two graphs in your EViews display (I used copy/paste here).

4
Pushing buttons is relegated to footnotes from here on. You should work with commands now. If you have to,
mark testscr and str, opening the two variables as a group, then select View/Multiple Graphs/Line).

10
 STR
23

22

21

20

19
1 2 3 4 5 6 7 8 9 10

TESTSCR
640

630

620

610

600
1 2 3 4 5 6 7 8 9 10

To get an even better idea about the relationship, you can display a two-dimensional relationship
in a scatterplot (see p. 106 of your Stock and Watson (2018) textbook). The command is

size_perform.scat linefit

where size_perform refers to the name of a previously created group.5

5
Alternatively select View/Graph/Scatter/Details: Fit Lines: Regression Line. Choose None in the resulting
Global Fit Options Box.

11
 640

635

630

TESTSCR
625

620

615

610

605
19 20 21 22 23

STR

(Not to worry about the positive slope here. Remember, this is a sample, and a very small one at
that. After all, you may get 10 heads in 10 flips of a coin.)

d) Simple Regression

There is a commonly held belief among many parents that lower student-teacher ratios will result
in better student performance. Consequently, in California, for example, all K-3 classes now
have a maximum student-teacher ratio of 20 (“Class Size Reduction Act” – CSR).

For the 10 school districts in our sample, we seem to have found a positive relationship between
larger classes and poor student performance. This disturbing result (increase in class size results
in higher test scores) will disappear once we work with all 420 observations from the California
School Data Set, and we will then find the negative relationship you have seen in the textbook –
for now, we are more concerned about learning techniques in EViews.

In the previous section, we included a regression line in the scatterplot, something that you
should have encountered towards the end of your statistics course. However, the graph of the
regression line does not allow you to make exact quantitative statements about the relationship;
you want to know the exact values of the slope and the intercept. For example, in general
applications, you may want to predict the effect of increase by one in the explanatory variable
(here the student-teacher ratio) on the dependent variable (here the test scores).

To answer the questions relating to the more precise nature of the relationship between large
classes and poor student performance, you need to estimate the regression intercept and slope. A

12
regression line is little else than fitting a line through the observations in the scatterplot
according to some principle. You could, for example, draw a line from the test score for the
lowest student-teacher ratio to the test score for the highest student-teacher ratio, ignoring all the
observations in between. Or you could sort the data by student-teacher ratio and split the sample
in half so that the observations with the lowest ten student-teacher ratios are in one set, and the
observations with the highest ten student-teacher ratios are in the other set. For each of the two
sets you could calculate the average student-teacher ratio and the corresponding average test
score, and then connect the two resulting points. Or you could just eyeball the relationship. Some
of these principles have better properties than others to infer the true underlying (population)
relationship from the given sample. The principle of ordinary least squares (OLS), for example,
will give you desirable properties under certain restrictive assumptions that are discussed in
Chapter 4 of the Stock/Watson textbook.

Back to computing. If the dependent variable, Y, is only determined by a single explanatory

variable X in a linear fashion of the type

Yi   0  1 X i  ui i=1,2, ..., N

with “u” representing the error, or random disturbance, not accounted for by the linear equation,
then the task is to find some value for  0 and 1 . If you had values for these coefficients, then
1 describes the effect of a unit increase in X on Y. Often a regression line is a linear
approximation to an underlying relationship and the intercept  0 only has a useful meaning if
observations around X=0 occur in the data. As we have seen in the scatterplot above, there are no
observations around the student-teacher ratio of zero, and it is therefore better not to interpret the
numerical value of the intercept at all. Your professor most likely will give you a serious penalty
in the exam for interpreting the intercept here because with no students present, there is no score
to record. (What would be the function of the teacher in that case?)

There are various ways to estimate the regression line. The command for regressing a variable Y
on a constant (intercept) and another variable X is:

ls Y c X

where “ls” stands for least squares. Here, working with the command window,6 type

ls(h) testscr c str

6
If you are working in a Group Window, possibly by having invoked the Show option, then click on Proc. Next
press Make Equation, and a dialog box will open. If EViews has not suggested a regression of the test score on the
student-teacher ratio plus a constant (“c”; this letter is reserved in EViews for the constant – actually a vector of ones
– and you are not allowed to give another variable this name), then type in the variable names in that order (EViews
takes the first variable as the dependent variable; it does not matter if you place the constant before the explanatory
variable or after). Alternatively, start in the Main menu and click on Object and the New Object and finally
Equation. The same dialog box will open.

13
where the “h” in parentheses indicates that you are using heteroskedasticity-robust standard
errors (“c” stands for the intercept).

The output appears as follows:

Dependent Variable: TESTSCR

Method: Least Squares
Date: 11/01/18 Time: 16:56
Sample: 1 10
Included observations: 10
Huber-White-Hinkley (HC1) heteroskedasticity consistent standard errors
and covariance

Variable Coefficient Std. Error t-Statistic Prob.

C 618.8527 51.06075 12.11993 0.0000

STR 0.606961 2.333492 0.260108 0.8013

R-squared 0.006824 Mean dependent var 631.3500

Adjusted R-squared -0.117323 S.D. dependent var 9.264418
S.E. of regression 9.792813 Akaike info criterion 7.578031
Sum squared resid 767.1935 Schwarz criterion 7.638548
Log likelihood -35.89016 Hannan-Quinn criter. 7.511644
F-statistic 0.054969 Durbin-Watson stat 0.853391
Prob(F-statistic) 0.820522 Wald F-statistic 0.067656
Prob(Wald F-statistic) 0.801349

According to these results, lowering the student-teacher ratio by one student per class results in
an decrease of 0.6 points, on average, in the districtwide test score. Using the notation of your
textbook, you should display the results as follows:

 = 618.9 + 0.61  STR, R2 = 0.007, SER = 9.8

TestScore
(51.1) (2.33)

Note that the result for the 10 chosen school districts is quite different from the sample of all 420
school districts. However, this is a rather small sample and the regression R2 is quite low. As a
matter of fact, in Chapter 5 of your textbook, you will learn that the above slope is not
statistically significant.

e) Entering Data from a Spreadsheet

So far you entered data manually. Most often you will work with larger data sets that are external
to the EViews program, i.e., they will not be included in, or be part of, the program itself. This
makes sense as data sets either become very large or are generated by another program, such as a

14
spreadsheet.

Stock and Watson prresent the California test score data set in Chappter 4 of the textbook. L Locate
the correesponding Ex xcel file casschool.xls an
nd open it. N
Next, following the proccedures discuussed
previouslly, open a neew EViews workfile witth 420 obserrvations, andd use the Qu uick/Edit GGroup
(Empty Series) proccedure. Retu urn to the Exxcel file andd mark F2:R
R421. Next, using the “ccopy”
and “passte” comman nds common n to Window ws programss, move the data block to EViews. You
presumab bly are familiar with this procedure.. Make suree to select thhe grey box to the immeediate
right of “obs”
“ beforee pasting (th
his will highlight that coolumn). Nexxt “rename”” the 13 variiables
according g to the nam
me in the cells F1:R1.

This is what
w you shou
uld see in EV
Views:

ou are done, you are read

When yo dy to save the workfile. N
Name it cascchool.wf1.

You can now reprod duce Equatiion (4.9) fro om the textbbook. Use thhe regressioon commandd you
previouslly learned to
o generate thhe following g output (“FFreeze” the output and use the CelllFmt
button to
o adjust the number
n of diigits after thee decimal pooint).

15
 Dependent Variable: TESTSCR
Method: Least Squares
Date: 11/09/18 Time: 16:21
Sample: 1 420
Included observations: 420

Variable Coefficient Std. Error t-Statistic Prob.

C 698.93 9.47 73.82 0.0000

STR -2.28 0.48 -4.75 0.0000

R-squared 0.05 Mean dependent var 654.2

Adjusted R-squared 0.05 S.D. dependent var 19.1
S.E. of regression 18.58 Akaike info criterion 8.69
Sum squared resid 144315.48 Schwarz criterion 8.71
Log likelihood -1822.25 Hannan-Quinn criter. 8.69
F-statistic 22.58 Durbin-Watson stat 0.129
Prob(F-statistic) 0.000003

(You can find the (homoscedasticity-only) standard errors on p. 165 of the Stock and Watson
(2018) textbook. The regression R 2 , sum of squared residuals (SSR), and standard error of the
regression (SER) are presented in Section 4.3.)

f) Importing Data Files directly into EViews

Even though the cut and paste method seemed straightforward enough, there is a second, more
direct way to import data into EViews from Excel, which does not involve copying and pasting
data points.

Start again with a new workfile in EViews. Next press Proc /Import /Import from File. A
dialog box will open, and you will first have to specify the location where your data file
(caschool.xls) resides. After you double click on the file, another dialog box opens.

16
After youu click thro
ough the “Neext >” optio ons, and finnally “Finishh,” all the daata includinng the
variable names have been read in. i You are good g to go w
with the anaalysis. Note that EViewss also
allows yoou to importt other typess of data filess, e.g. STATTA files, althhough this m
may be a bit more
complicaated.

EViews will
w show th hat the data exist
e in the Workfile W
Window. Youu may want to check thaat the
data werre properly retrieved
r by
y typing the command “show testscr str” or rrunning the same
regressio
on as before.

You can also save data

d in ASCIII, spreadsheeet, STATA, SPSS, and oother formatts by clickinng on
ve As and theen looking at
File/ Sav a the variouss options in “Save as typpe.”

g) Data Transformat
T tions

So far, we
w have onlyy used data that alreadyy existed in ssome file thhat we eitherr created or used.
Almost always,
a you will be requ
uired to transsform some of the raw ddata that youu received bbefore
you run a regression
n. In EViewss you transfform variablles by usingg the “genr”” (as in geneerate)
command d. For exam
mple, Chapteer 8 of the Stock/Watsson textbookk introducess the polynoomial
regressio
on model, lo
ogarithms, annd interactioons betweenn variables. Let us reprroduce Equaations

17
(8.2), (8.11), (8.18), and
a (8.37) here.
h mands generrate the neceessary variabbles:7
The folllowing comm

genr avgi
inc2=avgin
nc^2
genr avgi
inc3=avgin
nc^3
genr lavg
ginc=log(a
avginc)
genr ltes
stscr=log(
(testscr)
genr strp
pctel=str*
*el_pct

h) Multip
ple Regressio
on Model

Economiic theory mo ost often suggests that the

t behaviorr of a certaiin variable is influenced not
only by another
a singlle variable, but
b by a mulltitude of facctors. The deemand for a product deppends
not only on the pricce of the pro oduct but allso on the pprice of otheer goods, inncome, tastee, etc.
Similarly
y, the Phillip
ps curve suggests that in
nflation depeends not onlyy on the uneemploymentt rate,
but also on
o inflationaary expectatiion and posssibly supply shocks, etc.

7
For exammple, I have gennerated a variabble called “avg
ginc2”, and asssigned it to be tthe square of thhe previously
a generating variable namees that are someewhat self-explanatory. Theyy
defined varriable “avginc””. Note that I am
variable1”, “vaariable2”, “variiable3”, etc. buut it is a good iidea to create vvariable names that
could havee been called “v
you can remmember.

18
An extension of the simple regression model is the multiple regression model, which
incorporates more than one regressor (see Equation (6.7) in the textbook on page 189).

Yi   0  1 X 1i   2 X 2i  ...   k X ki  ui , i = 1,…,n.

To estimate the coefficients of the multiple regression model, you proceed in a similar way as in
the simple regression model. The difference is that you now need to list the additional
explanatory variables. In general, the command is:

ls(options) Y c X1 X2 … Xk

where (options) can be omitted, in which case the command becomes simply

ls Y c X1 X2 … Xk

This is the default version of the regression command, and it gives you homoskedasticity-only
standard errors.

See if you can reproduce the following regression output, which corresponds to Column 5 in
Table 7.1 of the textbook (page 224). The option used below is (h) to produce heteroskedasticity-
robust standard error (EViews refers to these as “Huber-White-Hinkley (HC1) heteroscedasticity
consistent standard errors and covariance”).

Dependent Variable: TESTSCR

Method: Least Squares
Date: 11/09/18 Time: 18:22
Sample: 1 420
Included observations: 420
Huber-White-Hinkley (HC1) heteroskedasticity consistent standard errors
and covariance

Variable Coefficient Std. Error t-Statistic Prob.

C 658.5520 8.641528 76.20782 0.0000

STR -0.734326 0.256780 -2.859744 0.0045
EL_PCT -0.175534 0.033661 -5.214827 0.0000
LNAVGINC 11.56897 1.818811 6.360731 0.0000
MEAL_PCT -0.398234 0.033174 -12.00438 0.0000

R-squared 0.796213 Mean dependent var 654.1565

Adjusted R-squared 0.794248 S.D. dependent var 19.05335
S.E. of regression 8.642569 Akaike info criterion 7.163110
Sum squared resid 30998.01 Schwarz criterion 7.211208
Log likelihood -1499.253 Hannan-Quinn criter. 7.182121
F-statistic 405.3592 Durbin-Watson stat 1.522233
Prob(F-statistic) 0.000000 Wald F-statistic 417.1963
Prob(Wald F-statistic) 0.000000

19
The interrpretation off the coefficiients is equiivalent to thaat of a contrrolled sciencce experimennt: it
indicates the effect of
o a unit chaange in the relevant
r variiable on thee dependent variable, hoolding
all other factors
f consstant (“ceterris paribus”).

Section 7.2 of the Stock and Watson (20 018) textboook discussees the F-staatistic for teesting
restrictions involvingg multiple cooefficients. To
T test whetther all of thhe above coeefficients aree zero
with thee exception of the inttercept, clicck on View w/Coefficien nt Diagnostics/Wald Test-
Coefficieent Restricttions (imporrtant: you willw only seee the optionns in View iif you previously
clicked on
o the regresssion output window). The T regressioon coefficiennts are storedd in a vectorr c(1)
to c(k+1)), where thee number in parenthesess indicates thhe order of appearance in the regreession
output. Thus
T in the example
e c(1)) is the interccept or consstant term, c((2) is the coeefficient on STR,
and so foorth. To execcute the abovve test, enterr the followinng and presss enter:

The
T computerr will generaate the follow
wing output::
Wald Test:
Equation: Unttitled

Test Statistic Vallue df Pro

obability

F-statistic 417.1963 (4,, 415) 0

0.0000
Chi-square 1668
8.785 4 0
0.0000

20
 Null Hypothesis: C(2)=0, C(3)=0, C(4)=0, C(5)=0
Null Hypothesis Summary:

Normalized Restriction (= 0) Value Std. Err.

C(2) -0.734326 0.256780

C(3) -0.175534 0.033661
C(4) 11.56897 1.818811
C(5) -0.398234 0.033174

Restrictions are linear in coefficients.

See if you can generate the F-statistic of 5.43 following Equation (7.6) in the Stock and Watson
(2018) text and listed at the bottom of page 213 (restrict the coefficients of STR and Expn to be
zero.88

Next run the four regressions using the same technique as for multiple regression analysis.
Finally save your workfile again and exit the workfile.

Exercise

One of the problems with the type of tutorial you are working on is that you just follow
instructions without internalizing them. A typical student will finish the tutorial with few
problems but then little is retained. If I asked you to retrieve a data set and to run a few
regressions, for example, would you be able to do that? Or would you say “how do I do this?”

Let’s see how much you understood. Go to the Stock and Watson website for the 3rd edition
(http://www.pearsonhighered.com/stock_watson). Under “Introduction to Econometrics, 3/e
update” go to the Companion Website, click on Student Resources, and download CPS08_Data
(Excel Dataset), which is the the CPS data set for Chapter 8 (Data Sets for Replicating Empirical
Results: CPS Data Used in Chapter 8). Then replicate the results for columns (1) from Table 8.1
on page 284 of the Stock and Watson (2018) textbook. Why do you think your results differ from
those listed in the table? What if you found a way to restrict your sample to only include
individuals who are at least 30 but not older than 64? To find a way to restrict your sample, look
for Help and the smpl if command. Then restricting your sample to those individuals in that age
group, replicate columns (1) to (3). For column (4), define potential experience as (age – Years
of education – 6 ).

8 A word of caution here. In the above table, the F-statistic is 417.1963. In the regression output above, the same
listed F-statistic is 405.3592, even though it tests for the same restrictions, namely that all slope coefficients are
zero. Note that the latter statistic is the homoskedasticity-only F-statistic, even though the equation was estimated
using heteroskedasticity-robust standard errors.

21
Batch Files

You will skip this section if you only have the Student Version, since this feature is not
available for your version.

So far, you have either clicked on buttons in EViews or used the “Command Window” to type
executable statements. But what if you wanted to keep a permanent record of all the
transformations you made, regressions you tried, graphs you created, etc.? In that case, you
would need to create a “program” that consists of line commands similar to those that you used
in the “Command Window” previously. After having created such a program, you can then
execute (“run”) it and view the output afterwards (if you did not make any errors). Batch files
can also include loops and conditional branching.

To create a program, click on File and then New and Program. This opens the “Program” box.
Let’s create a program. Type in the following commands exactly as they appear below:

open c:\StockandWatsons\caschool.wf1
genr income=avginc*1000
stats income

Here is the meaning of the three lines of this program:

Line 1: This line concerns the data set. As you learned earlier in the tutorial, datasets in EViews
are called wf1 files. The dataset which you will use here is caschool.wf1, which you
downloaded earlier. The current line tells EViews the location and name of the dataset
to be used for the analysis. Before you save the Program-File, replace the path in this
line with the relevant path of the location where YOU saved caschool.wf1 to.

Line 2: This line tells EViews to create a new variable call income. The new variable is
constructed by multiplying the variable avginc by 1000. The variable avginc is
contained in the dataset and is the average household income in a school district
expressed in thousands of dollars. The variable income will be the average household
income expressed in dollars instead of thousands of dollars.

Line 3: This line tells EViews to compute some summary statistics. EViews will produce the
mean, standard deviation, etc.

As long as you have replaced the path in line 1 with the relevant path from the computer you are
working on, and if you downloaded/saved the California Test Score Data Set, then we are good
to go. Save the Program-file, using the .prg suffix and perhaps call the file Tutorialch4.prg. Next
execute this Program-File by clicking on the Run button. This will “execute” or “run” the
program. The results should produce the following information:

22
 Date: 11/20/18
Time: 10:50
Sample: 1 420

INCOME

Mean 15316.59
Median 13727.80
Maximum 55328.00
Minimum 5335.000
Std. Dev. 7225.890
Skewness 2.215156
Kurtosis 9.532125

Jarque-Bera 1090.186
Probability 0.000000

Sum 6432967.
Sum Sq. Dev. 2.19E+10

Observations 420

You now have an initial idea of how to work with Program-Files in EViews. The rest of this part
of the tutorial will guide you through further commands and make the initial Program-File more
complex. I suggest that you continue to work with the batch file you just created and then for you
to add new lines to this program (if you use the .pdf version of this tutorial or have printed the
tutorial using a color printer, then the new commands will appear in red).

‘*****************************************************************************************
' Stock and Watson, chapter 4-8 (EViews 10.0 Version)
‘
‘ caschool.wf1 is the California School Data Set
‘ ****************************************************************************************
‘ Read in the Dataset
‘ ****************************************************************************************
open c:\StockandWatsons\caschool.wf1
‘ ****************************************************************************************
‘ Transform Data and Create New Variables
‘ ****************************************************************************************
‘ ****** Construct Average District Income in $s
genr income = avginc*1000
‘ ****************************************************************************************
‘ Carry Out Statistical Analysis
‘ ****************************************************************************************
' ******* Summary Statistics for Income
‘ ***************************************************************************************
stats income
‘ ***************************************************************************************
‘ End of Program
‘ ***************************************************************************************

23
The new version of the Program-File carries out exactly the same calculations as before.

A new feature of the above Program-File is that many of the lines begin with a single quote (‘).
EViews ignores the text that comes after ‘, so that these lines can be used for comments or to
describe what the commands that follow are doing. Bottom line: Comments are useful if you
want to remember later what you were doing or if you want others to understand your program.
They do not affect the actual execution of the program

Next, change the previous version of the Program-File by adding commands until the new
version looks as follows (again, new commands can be seen in red if your tutorial displays
colors):

‘*****************************************************************************************
' Stock and Watson, chapter 4-8 (EViews 10.0 Version)
‘
‘ caschool.wf1 is the California School Data Set
‘ ****************************************************************************************
‘ Read in the Dataset
‘ ****************************************************************************************
open c:\StockandWatsons\caschool.wf1
‘ ****************************************************************************************
‘ Transform Data and Create New Variables
‘ ****************************************************************************************
‘ ****** Construct Average District Income in $s
genr income = avginc*1000
‘ ****** Define variables for subset of data
smpl if str<20
genr testscr_lo=testscr
smpl 1 420
smpl if str >= 20
genr testscr_hi = testscr
‘ ****************************************************************************************
‘ Carry Out Statistical Analysis
‘ ****************************************************************************************
' ******* Summary Statistics for Income and testscores
‘ ***************************************************************************************
smpl 1 420
stats income
stats testscr
group tab4_1 str testscr
tab4_1.stats
testscr.teststat(mean=0)
group testdiff20 testscr_lo testscr_hi
testdiff20.testbtw(mean)
‘ ***************************************************************************************
'* Repeat the Analysis using STR = 19
****************************************************************************************
smpl if str<19
genr testscr_lo = testscr
smpl 1 420
smpl if str >= 19

24
genr testscr_hi = testscr
troup testdiff19 testscr_lo testscr_hi
testdiff19.testbtw(mean)

‘ ***************************************************************************************
‘ End of Program

There are three new features in this new version:

1) New variables are created using only a portion of the dataset. Two of the variables in the
dataset are testscr (the average test score in a school district) and str (the district’s
average class size or student teacher ratio). The Eviews commands

smpl if str<20
genr testscr_lo=testscr
smpl 1 420
smpl if str >= 20
genr testscr_hi = testscr

generate new variables testscr_lo and testscr_hi. testscr_lo is only defined for districts that
have an average class size of less than twenty students, that is, for which str < 20.
Similarly, testscr_hi is only defined for districts that have an average class size of more
than 20 students (str > 20).

The statement str < 20 is an example of a “relational operation”. EViews uses several relational
operators:

< less than

> greater than
<= less than or equal to
>= greater than or equal to
<> not equal to

2) There has been a small, but important, change in the summary statistics: you can have
multiple variables displayed instead of showing them separately for income and
testscores. However, if you want EViews to keep the summary statistics in your workfile,
then you have to give the resulting output (“object”) a name (here: tab4_1) and then ask
EViews to display summary statistics for that object. The group command gives the
object a name and then lists which variables below in the group. The tab4_1.stats
command asks EViews to generate summary statistics for the variables in that group.
After you run the program, you can click on the table you have generated in the workfile
“caschool.wf1”, and see the summary statistics output. If you save the workfile, the
summary statistics table will be saved with it.

25
3) The testscr.teststat(mean=0) command asks EViews to test that the population mean is
zero (in this example, the t-test that the population mean of test scores is equal to zero is
not really of interest, but it shows you how EViews conducts t-tests for means in general).

The output is as follows:

Hypothesis Testing for TESTSCR

Date: 11/15/18 Time: 15:04
Sample: 1 420
Included observations: 420
Test of Hypothesis: Mean = 0.000000

Sample Mean = 654.1565

Sample Std. Dev. = 19.05335

Method Value Probability

t-statistic 703.6149 0.0000

The output shows the mean and the standard deviation of the variable testscr, and
computes a t-test that the population mean is equal to zero. (Unfortunately it does not
compute a 95% confidence interval for the population mean.)

4) The second command involving a t-test is testdiff.testbtw(mean), which produces the

following table:

Test for Equality of Means Between Series

Date: 11/15/18 Time: 15:23
Sample: 1 420
Included observations: 420

Method df Value Probability

t-test 418 3.999193 0.0001

Satterthwaite-Welch t-test* 403.6070 4.042582 0.0001
Anova F-test (1, 418) 15.99354 0.0001
Welch F-test* (1, 403.607) 16.34247 0.0001

*Test allows for unequal cell variances

Analysis of Variance

Source of Variation df Sum of Sq. Mean Sq.

Between 1 5605.547 5605.547

Within 418 146504.0 350.4881

Total 419 152109.6 363.0301

26
 Executing the statement resulted in a test of the hypothesis that testscr_lo and testscr_hi
come from populations with the same mean. That is, the command computes the t-
statistic for the null hypothesis that the (population) mean of test scores for districts with
class sizes less than 20 students is the same as the mean of test scores for districts with
class sizes greater than 20 students. The “Satterthwaite-Welch t-test” reports the version
of the test that assumes unequal variances in the two populations. EViews will also
assume that the series are unpaired, meaning that the observations are for different
districts: these are not panel data representing the same entity at two different time
periods (see section 3.4 in Stock and Watson (2018)).

5) A last new feature in the Program-File is to show you how to replace data. This appears
near the bottom of the file. Here, the analysis is to be carried out again, but using 19 as
the cutoff for small classes. Note that the variables testscr_lo and testscr_hi already exist
(they were defined by the genr command earlier in the program), EViews will “generate”
variables with the same name by using the genr command and then the same variable
name. There is no need for a separate replace command. In essence, the command
instructs the program to overwrite the previously stored data.

You are now ready to execute (“run”) the program as done before.

As before, change the previous version of the Program-File by adding commands until the new
version looks as follows (again, new commands can be seen in red if your tutorial displays
colors):

‘*****************************************************************************************
' Stock and Watson, chapter 4-8 (EViews 10.0 Version)
‘
‘ caschool.wf1 is the California School Data Set
‘ ****************************************************************************************
‘ Read in the Dataset
‘ ****************************************************************************************
open c:\StockandWatsons\caschool.wf1
‘ ****************************************************************************************
‘ Transform Data and Create New Variables
‘ ****************************************************************************************
‘ ****** Construct Average District Income in $s
genr income = avginc*1000
‘ ****** Define variables for subset of data
smpl if str<20
genr testscr_lo=testscr
smpl 1 420
smpl if str >= 20
genr testscr_hi = testscr
‘ ****************************************************************************************
‘ Carry Out Statistical Analysis
‘ ****************************************************************************************
' ******* Summary Statistics for Income and testscores

27
‘ ***************************************************************************************
smpl 1 420
stats income
stats testscr
‘***************************************************************************************
‘ ******* Table 4.1 ***********
‘***************************************************************************************
group tab4_1 str testscr
tab4_1.stats
‘ *************************************************************************************
‘******** Figure 4.2 and Figure 4.3 **********
‘*************************************************************************************
group Fig4_2 str testscr
Fig4_2.scat
group Fig4.3 str testscr
Fig4_3.scat linefit
‘*************************************************************************************
‘********** Correlation *********
‘*************************************************************************************
group cor_str_testscr str testscr
cor_str_testscr.cor
‘ *************************************************************************************
‘ ********** Equation 4.11 and 5.8 ******
‘ ************************************************************************************
equation eq4_11.ls(h) testscr c str
‘ ************************************************************************************
‘ *********** Equation 5.18 ********
‘ ************************************************************************************
genr dsize=0
smpl if str<20
genr dsize=1
smpl 1 420
equation eq4_33.ls(h) testscr c dsize
‘ *************************************************************************************
group tab4_1 str testscr
tab4_1.stats
testscr.teststat(mean=0)
group testdiff20 testscr_lo testscr_hi
testdiff20.testbtw(mean)
‘ ***************************************************************************************
'* Repeat the Analysis using STR = 19
‘ ****************************************************************************************
smpl if str<19
genr testscr_lo = testscr
smpl 1 420
smpl if str >= 19
genr testscr_hi = testscr
group testdiff19 testscr_lo testscr_hi
testdiff19.testbtw(mean)

‘ ***************************************************************************************
‘ End of Program

28
The new commands reproduce some of the empirical results shown in Chapter 4 and 5 of Stock
and Watson (2018). There are several features of EViews included in the new commands which
have not been used in the previous examples.

1) The commands

group Fig4_2 str testscr

Fig4_2.scat
group Fig4.3 str testscr
Fig4_3.scat linefit

construct scatterplots of testscr versus str without (first two lines) and with (line 3 and 4)
the estimated regression line for the simple regression of the California Test Score Data
Set, shown in on pages 106 and 109 of Stock and Watson (2018).

2) The commands

group cor_str_testscr str testscr

cor_str_testscr.cor

tell EViews to compute the correlation between the student teacher ratio and test scores.

3) Next you will reproduce equations (4.11) and (5.8) in Stock and Watson (2018) by using
the ls command:

equation eq4_11.ls(h) testscr c str

instructs Eviews to run an OLS regression with testscr as the dependent variable and str as
the regressor. The robust (short h) option tells EViews to calculate heteroscedasticity-
robust formulas for the standard errors of the regression coefficient estimators. Omitting
this option results in the display of homoscedasticity-only standard errors. The output
should looks as follows:

29
 Dependent Variable: TESTSCR
Method: Least Squares
Date: 11/17/18 Time: 10:17
Sample: 1 420
Included observations: 420
Huber-White-Hinkley (HC1) heteroskedasticity consistent standard errors
and covariance

Variable Coefficient Std. Error t-Statistic Prob.

C 698.9330 10.36436 67.43619 0.0000

STR -2.279808 0.519489 -4.388557 0.0000

R-squared 0.051240 Mean dependent var 654.1565

Adjusted R-squared 0.048970 S.D. dependent var 19.05335
S.E. of regression 18.58097 Akaike info criterion 8.686903
Sum squared resid 144315.5 Schwarz criterion 8.706143
Log likelihood -1822.250 Hannan-Quinn criter. 8.694507
F-statistic 22.57511 Durbin-Watson stat 0.129062
Prob(F-statistic) 0.000003 Wald F-statistic 19.25943
Prob(Wald F-statistic) 0.000014

4) The final innovation over the previous version of the Program-File is contained in the
commands following the line Equation 5.18. First a binary (sometimes referred to as
dummy or indicator) variable “d” is created suing the EViews commands

genr dsize=0
smpl if str<20
genr dsize=1

You first initialize the variable to take on the value of “0” for the entire sample, and then
overwrite the observations with a “1” for which the class size is less than 20. The final ls
command tells EViews to run a regression of test scores on the binary variable just
created. The output reproduces equation (5.18) on p. xxx of Stock and Watson (2018).

Run the program now and look at the output.

The upcoming Program-File will be the last program for cross sectional data in this tutorial.
Having understood all five should give you a solid grounding in programming. As before, there
are several commands added to the previous version of the Program-File. Add these commands
to your older version until the new version looks as follows (new commands can be seen in red if
you tutorial displays colors):

‘*****************************************************************************************
' Stock and Watson, chapter 4-8 (EViews 10.0 Version)
‘
‘ caschool.wf1 is the California School Data Set
‘ ****************************************************************************************

30
 ‘ Read in the Dataset
‘ ****************************************************************************************
open c:\StockandWatsons\caschool.wf1
‘ ****************************************************************************************
‘ Transform Data and Create New Variables
‘ ****************************************************************************************
‘ ****** Construct Average District Income in $s
genr income = avginc*1000
‘ ****** Define variables for subset of data
smpl if str<20
genr testscr_lo=testscr
smpl 1 420
smpl if str >= 20
genr testscr_hi = testscr
‘ ****************************************************************************************
‘ Carry Out Statistical Analysis
‘ ****************************************************************************************
' ******* Summary Statistics for Income and testscores
‘ ***************************************************************************************
smpl 1 420
stats income
stats testscr
‘***************************************************************************************
‘ ******* Table 4.1 ***********
‘***************************************************************************************
group tab4_1 str testscr
tab4_1.stats
‘ *************************************************************************************
‘******** Figure 4.2 and Figure 4.3 **********
‘*************************************************************************************
group Fig4_2 str testscr
Fig4_2.scat
group Fig4.3 str testscr
Fig4_3.scat linefit
‘*************************************************************************************
‘********** Correlation *********
‘*************************************************************************************
group cor_str_testscr str testscr
cor_str_testscr.cor
‘ *************************************************************************************
‘ ********** Equation 4.11 and 5.8 ******
‘ ************************************************************************************
equation eq4_11.ls(h) testscr c str
‘ ************************************************************************************
‘ *********** Equation 5.18 ********
‘ ************************************************************************************
genr dsize=0
smpl if str<20
genr dsize=1
smpl 1 420
equation eq4_33.ls(h) testscr c dsize
‘ *************************************************************************************
group tab4_1 str testscr
tab4_1.stats

31
testscr.teststat(mean=0)
group testdiff20 testscr_lo testscr_hi
testdiff20.testbtw(mean)
‘ ***************************************************************************************
'* Repeat the Analysis using STR = 19
‘ ****************************************************************************************
smpl if str<19
genr testscr_lo = testscr
smpl 1 420
smpl if str >= 19
genr testscr_hi = testscr
group testdiff19 testscr_lo testscr_hi
testdiff19.testbtw(mean)
‘ ***************************************************************************************
‘ ********* Table 6.1 **********
‘ **************************************************************************************
' initializing variables for table
' **************************************************************************************
smpl 1 420
genr str_20 = 0
genr elq1 = 0
genr elq2 = 0
genr elq3 = 0
genr elq4 = 0
' ***************************************************************************************
' Creating Binary Variables
' **************************************************************************************
smpl if str<20
genr str_20 = 1
smpl 1 420
smpl if str_20 = 1
genr ts_lostr = testscr
smpl 1 420
smpl if str_20 = 0
genr ts_histr = testscr
smpl 1 420
smpl if el_pct < 1.9
genr elq1 = 1
smpl 1 420
smpl if el_pct >= 1.9 and el_pct < 8.8
genr elq2 = 1
smpl 1 420
smpl if el_pct >= 8.8 and el_pct < 23.0
genr elq3 = 1
smpl 1 420
smpl if el_pct >= 23.0
genr elq4 = 1
' **************************************************************************************
' running differenece in means tests
' **************************************************************************************
smpl 1 420
group Table_6_1_test_1 ts_lostr ts_histr
Table_6_1_test_1.testbtw(mean)
smpl if elq1 = 1

32
group Table_6_1_test_2 ts_lostr ts_histr
Table_6_1_test_2.testbtw(mean)
smpl 1 420
smpl if elq2 = 1
group Table_6_1_test_3 ts_lostr ts_histr
Table_6_1_test_3.testbtw(mean)
smpl 1 420
smpl if elq3 = 1
group Table_6_1_test_4 ts_lostr ts_histr
Table_6_1_test_4.testbtw(mean)
smpl 1 420
smpl if elq4 = 1
group Table_6_1_test_5 ts_lostr ts_histr
Table_6_1_test_5.testbtw(mean)
‘ **************************************************************************************
‘ ******* Equation 7.5 *************
‘ **************************************************************************************
smpl 1 420
equation eq7_5.ls(h) testscr str el_pct
eq7_5.output
‘ ***************************************************************************************
‘ ******* Equation 7.6 **************
‘ *************************************************************************************
genr expn_stu = expn_stu/2000
equation eq7_6.ls(h) testscr c str expn_stu el_pct
eq7_6.output
‘ ************************************************************************************
‘ Display Variance-Covariance Matrix
‘ *************************************************************************************
eq7_6.coefcov
' *************************************************************************************
' ******* F-test report in text
‘ ************************************************************************************
eq7_6.wald c(2) = 0, c(3) = 0
‘ **************************************************************************************
' ******** Correlations reported in text
‘ *************************************************************************************
group cor_str_otherrhsvar str expn_stu el_pct meal_pct calw_pct
cor_str_otherrhsvar.cor
‘ *************************************************************************************
‘ ******** Table 7.1 *********
‘ *************************************************************************************
‘ Column (1)
equation eq_tab7_1_col1.ls(h) testscr c str
eq_tab7_1_col1.output
‘ Column (2)
equation eq_tab7_1_col2.ls(h) testscr c str el_pct
eq_tab7_1_col2.output
‘ Column (3)
equation eq_tab7_1_col3.ls(h) testscr c str el_pct meal_pct
eq_tab7_1_col3.output
‘ Column (4)
equation eq_tab7_1_col4.ls(h) testscr c str el_pct calw_pct
eq_tab7_1_col4.output

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‘ Column (5)
equation eq_tab7_1_col5.ls(h) testscr c str el_pct meal_pct calw_pct
eq_tab7_1_col5.output
‘ **************************************************************************************
‘ ******* homoscedasticity only F-Statistic
‘ **************************************************************************************
equation eq_homosk.ls testscr str expn_stu el_pct
equation eq_homosk1.ls testscr c el_pct
‘ *************************************************************************************
' * End of Program
' ************************************************************************************

The file produces several of the empirical results from Chapter 7 of Stock and Watson (2018).

In essence there is only one new command:

1) The first new command involves the test of restrictions in equation 7.6 (page xxx of Stock
and Watson (2018)). The command

equation eq7_6.ls(h) testscr c str expn_stu el_pct

‘ ************************************************************************************
‘ Display Variance-Covariance Matrix
‘ *************************************************************************************
eq7_6.coefcov

instruct EViews to compute the regression. The command coefcov asks EViews to print out the
estimated variances and covariances of the estimated regression coefficients. The command

eq7_6.wald c(2) = 0, c(3) = 0

gets EViews to carry out the joint test that the coefficients on str and expn_stu are both equal to
zero.

34
The output will be as follows:

Wald Test:
Equation: EQ7_6

Test Statistic Value df Probability

F-statistic 4301.658 (2, 416) 0.0000

Chi-square 8603.315 2 0.0000

Null Hypothesis: C(1) = 0, C(2) = 0

Null Hypothesis Summary:

Normalized Restriction (= 0) Value Std. Err.

C(1) 649.5779 15.45834

C(2) -0.286399 0.482073

Restrictions are linear in coefficients.

You will find other examples of Program-Files in the accompanying Website for the Stock and
Watson (2018) econometrics textbook. You can download EViews Program-Files from there to
reproduce all of the analysis in Chapters 3-13. You will also find an EViews Program File for the
time series chapters 15-17 there. EViews programming for time series is somewhat different than
for cross-sectional of panel data, and EViews is particularly useful when working with time
series data.

A summary of frequently used EViews commands is given at the end of the tutorial. As an
exercise, start generating the equations, graphs, and tables of chapters 5-9 in Stock and Watson
(2018).

3. TIME SERIES DATA

Many of you using EViews will do so since you are studying time series, or data of a single entity
across time. An example may be consumption in the U.S. from 1955 to now. Time series
analysis is used in Stock and Watson (2018) in chapters 15 to 17.

One major difference using time series data is that the order of the observations matter: you
would lose much information if you “shuffled the deck” so to speak. In other words, while the
order of observations does not matter in cross sectional data, with time series it is very important.
Next, much information about the current behavior of a variable is contained in previous values
of the same variable, or its “lags.” We refer to “(t-1)” as a one period lag (similarly, “(t+1)” is a
lead). In general, there are (t-j) lags that can be calculated (see Key Concept 15.1 on page 515 in
Stock and Watson (2018)).

35
On the Stock and Watson (2018) website, you will find quarterly data for real GDP. Using the
same methodology as discussed earlier in the tutorial, open the Excel spreadsheet and copy the
data for real GDP into an EViews data file. In order to do this, open a new workfile (“Open a
New Workfile”), chose Frequency Quarterly under Data Specification, and designate 1955:1
and 2017:4 as the start and end date. Next cut and paste the Excel data for the GDPC1 column
into the new group (“Quick” then “Empty Group (Edit Series)”. Rename the variable gdpr
(close the group, right click on ser01, then rename). Next save the workfile and name it
“ch15usmacro.wf1”.

The econometric task in Ch. 15 is to forecast the real GDP growth rate. So far, we have only read
in the real GDP level and need to convert it into an annualized rate of GDP growth. We do this
through the following transformation:

GDPt  GDPt 1  GDP t 

gY , t =  400 =  - 1   400  400   ln(GDPt )  ln(GDPt 1 )   400 ln(GDPt )
GDPt 1  GDP t-1 

Here is the first program file for you to create:

‘*****************************************************************************************
' Stock and Watson, chapter 15 (EViews 10.0 Version)
‘
‘ ch15usmacro.wf1 is the California School Data Set
‘ ****************************************************************************************
‘ Read in the Dataset
‘ ****************************************************************************************
open c:\StockandWatsons\ ch15usmacro.wf1

‘ ****************************************************************************************
‘ Transform Data and Create New Variables
‘ ****************************************************************************************
‘ ****** Construct growth rate of Real GDP
‘ *************************************************************************************
smpl 1955:1 2017:4
genr lgdpr = log(gdpr)
genr gdpgr = 400*(lgdpr-lgdpr(-1))
' *************************************************************************************
' ****** Table 15.1 *******
' *************************************************************************************
smpl 2016:4 2017:4
show gdpr lgdpr gdpgr gdpgr(-1)
' ************************************************************************************
' * End of Program
' ************************************************************************************

Differently from the cross sectional analysis, the sample command now indicates the year and
the quarter. Hence we do our transformations for the entire sample period 1955Q1 to 2017Q4.

36
The next two lines create the log of real GDP, the lag of real GDP, and the growth rate as in
equation (15.1) of the Stock and Watson (2018) textbook. To create past values of variables, you
generate a lag by adding a “(-1)” after its variable name in the “genr” statement. In a
spreadsheet, this amounts to copying an entire data series and pasting it into a new column one
observation down: the first observation becomes the second observation, etc. The procedure
generalizes to higher lags: Xt-12 is X(-12).9

The final command reproduces the values of Table 15.1 on p. 516 of the textbook.
GDPR LGDPR GDPGR GDPGR(-1)

2016Q4 16851.42 9.732190 1.743040 2.742267

2017Q1 16903.24 9.735261 1.228157 1.743040
2017Q2 17031.085 9.742795 3.013954 1.228157
2017Q3 17163.894 9.750563 3.107115 3.013954
2017Q4 17271.702 9.756825 2.504579 3.107115

Add the following lines of code (listed in red) into the program-file and run it.

‘*****************************************************************************************
' Stock and Watson, chapter 15 (EViews 10.0 Version)
‘
‘ ch15usmacro.wf1 is the California School Data Set
‘ ****************************************************************************************
‘ Read in the Dataset
‘ ****************************************************************************************
open c:\StockandWatsons\ ch15usmacro.wf1

‘ ****************************************************************************************
‘ Transform Data and Create New Variables
‘ ****************************************************************************************
‘ ****** Construct growth rate of Real GDP
‘ *************************************************************************************
smpl 1955:1 2017:4
genr lgdpr = log(gdpr)
genr gdpgr = 400*(lgdpr-lgdpr(-1))
' *************************************************************************************
' ****** Table 15.1 *******
' *************************************************************************************
smpl 2016:4 2017:4
show gdpr lgdpr gdpgr gdpgr(-1)
' ************************************************************************************
' ********** Figure 15.1

9
In mathematics, a lag is defined (loosely) through the use of a “lag-operator” L, where Lixt= xt-i. Similarly, the
“difference operator”Δ = (1 – L), so that Δxt = xt – xt–1. See Appendix 15.3 of the textbook for more details.

37
'************************************************************************************
smpl 1960:1 2017:4
group Fig15_1a lgdpr
Fig15_1a.line(m)
freeze(logRDGP) Fig15_1a
group Fig15_1b gdpr
Fig15_1b.line(m)
freeze(gdprg) Fig15_1b
' *********************************************************************************
' AR(1) and AR(2) regressions
' ********************************************************************************
smpl 1962:1 2017:3
equation eq15_9.ls gdpgr c gdpgr(-1)
eq15_9.output
equation eq15_11.ls gdpr c gdpgr(-1 to -2)
eq15_11.output
'********************************************************************************
' * End of Program
' ************************************************************************************

Here is what the new commands do:

1) Fig15_1a and Fig15_1b.line(m) produce a time series plot, meaning they plot the two
series against time on the horizontal axis. The freeze command allows you to store the
graph permanently, possibly to cut and paste it into a Word document. The graph should
look as follows:

GDPGR
20

15

10

‐5

‐10
65 70 75 80 85 90 95 00 05 10 15

2) You should be familiar with the ls command from the cross sectional part of the tutorial.

38
As before, we have used heteroscedasticity-robust standard errors. You may want to
compare the output to equation (15.11) in Stock and Watson (2018).

Dependent Variable: GDPGR

Method: Least Squares
Date: 11/19/18 Time: 10:18
Sample: 1962Q1 2017Q3
Included observations: 223
Huber-White-Hinkley (HC1) heteroskedasticity consistent standard errors
and covariance

Variable Coefficient Std. Error t-Statistic Prob.

C 1.602751 0.371611 4.312978 0.0000

GDPGR(-1) 0.279235 0.076899 3.631174 0.0004
GDPGR(-2) 0.176734 0.077253 2.287720 0.0231

R-squared 0.145348 Mean dependent var 2.969795

Adjusted R-squared 0.137578 S.D. dependent var 3.244147
S.E. of regression 3.012731 Akaike info criterion 5.056933
Sum squared resid 1996.840 Schwarz criterion 5.102769
Log likelihood -560.8480 Hannan-Quinn criter. 5.075436
F-statistic 18.70732 Durbin-Watson stat 2.005166
Prob(F-statistic) 0.000000 Wald F-statistic 13.36954
Prob(Wald F-statistic) 0.000003

39
4. SUMMARY OF FREQUENTLY USED EVIEWS COMMANDS

The command ‘genr’ creates new variables and modifies existing variables.

Examples:

genr expn=expn_stu/1000

generates the expenditure variable used in the textbook by dividing the original data by 1,000.

genr avginc2=avginc^2
genr lavginc=log(avginc)

create the square and log of average income, respectively.

Note that commands of the type

genr testscr = testscr/100

simply modify an existing variable.

The most frequently used operators are + (addition), - (subtraction), * (multiplication), /

(division), ^ (exponentiation). Log(x) calculates the natural logarithm of x (see the above
example) and exp(x) computes the exponent of x.

When working with time series data, lags are frequently used. EViews allows you to create these
simply by entering (-i) immediately after the variable name:

genr dinf=inf-inf(-1)
genr yeardinf=inf-inf(-4)

The first command generates the quarterly change in the inflation rate (assuming that you work
with quarterly data), while the second generates the annual change in the inflation rate.

The sample range is set through the ‘smpl’ command. The command is of the type: smpl n1 n2,
where n1 and n2 are the beginning and end dates (first and last observations) for which EViews
will execute the commands that follow.

Examples are

smpl 1 420
smpl 1959:1 2001:4

In the first case, EViews is instructed to use all 420 observations of the California Test Score
Data Set used in Chapters 4-9. The second example restricts the sample to the first quarter of
1959 to the last quarter of 2001.

40
Note that you can work with a subsample by using relational operators.

smpl if str>=20

only looks at observations with a student-teacher ratio of less than 20.

The most frequently used statistical operations involve running regressions (‘ls’), establishing
the correlation between variables (‘cor’), and graphing variables (‘line’).

EViews creates results by storing them in so-called objects. Initially, you will use the ‘equation’
object and the ‘group’ object most often, as in the following examples:

equation eq4_7.ls(h) testscr c str

equation eqtab5_2_5.ls(h) testscr c str el_pct meal_pct calw_pct
equation eq12_7.ls(h) dinf c dinf(-1)

In each case, an equation object is declared first and a name is assigned to it. ‘ls’ then instructs
EViews to use OLS estimation for the equation. The dependent variable appears first, followed
by the regressors, where ‘c’ is used for the intercept (‘c’ is a reserved name in EViews, meaning
that you cannot use it to generate a variable called ‘c’).

To create a line graph or to view the correlation between variables, you first must assign the
variables to a group and name this group. Next, you execute the correlation and graphing through
the ‘cor’ and ‘line’ command. Examples:

group cor_str_testscr str testscr

cor_str_testscr.cor

Here the variables str (student-teacher ratio) and testscr (test score) are assigned to a group
called cor_str_testscr (the name was chosen to indicate what the group was used for, but we
could have named it almost anything alternatively), and EViews is then instructed to calculate
the correlation between the variables in the group. The group can contain more than two
variables.

In the following example, inf (inflation) and lhur (unemployment rate) are assigned to a group
called Fig12_1 and are then plotted (where ‘m’ is an option that allows for the display of
multiple graphs).

group Fig12_1 inf lhur

Fig12_1.line(m)

Another topic you may come across is statistical distribution functions. EViews provides
functions that provide access to the density or probability functions, cumulative distribution,
quantile functions, and random number generators for a number of standard statistical
distributions. For example, the following command would tell show you that  42 Pr(Y  7.78) 

41
0.90:
genr result=@cchisq(7.78,4)

For a complete table and descriptions of distribution functions you can use, search for “statistical
distribution functions” under the Help section.

5. FINAL NOTE

For a complete list of commands, consult the EViews Command and Programming Reference or
the User’s Guide. Alternatively, use the “Help” command inside EViews. Under the Find tab in
EViews Help Topics, you can search for whatever you are looking for. As mentioned before,
this tutorial is not intended to replace the Reference or User’s Guide. The best way to learn how
to use the program is to spend some time exploring and playing with it.

EViews replication batch files for all the results in the Stock/Watson textbook are available from
the Web site. You are invited to download these and study them.

42