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Ecotrix Handout

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Ecotrix Handout

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BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, Pilani

Pilani Campus
AUGS/ AGSR Division

SECOND SEMESTER 2023-24


COURSE HANDOUT
Date: 10.01.2024
In addition to part I (General Handout for all courses appended to the Timetable), this portion gives further
specific details regarding the course.
COURSE NO. : ECON F241
COURSE TITLE : ECONOMETRIC METHODS
INSTRUCTOR-IN-CHARGE : DR. RAHUL ARORA
TUTOR : MR. SHARADENDU SHARMA
1. Course Description
Introduction to Regression analysis: Specification of the simple linear regression model, least square method
of estimation, classical OLS assumptions, general and confidence approach to hypothesis testing; Multiple
regression analysis; Non-linear models and transformation of variables; Estimation of single equation
economic models and related problems: Autocorrelation, Heteroscedasticity, Multicollinearity, and Model
specification; Regression using dummy variables on the right-hand side of regression equation; Binary Choice
models and estimation, Introduction to models using Time-Series data, Simultaneous equations estimation -
(Including Applications)
2. Scope and Objective of the Course
This course aims to introduce students to econometric theory and methods. It covers the essential tools of
estimation and inference in the context of the single-equation linear regression model and deals primarily with
least squares estimation methods. The course emphasizes the theoretical understanding and practical
application of these essential regression analysis tools. Both conceptual and practical problems are considered,
such as multicollinearity, dummy variable trap, heteroscedasticity, Autocorrelation, specification, and
measurement errors. Some emphasis will also be placed on models using time series data and simultaneous
equations estimation. The application part of the course consists of manually solving problems in the class
and handling data with statistical software through assignments. The course is designed to build a solid base
of theoretical understanding and exercise this theory with economic applications with the help of available
statistical software (STATA or R), providing a base of practical knowledge.
3. Text Book
TB1 (For theory) – Christopher Dougherty, Introduction to Econometrics, Oxford, Fourth Edition,
Indian Edition, 2011
TB2 (For practice) – Damodar. N. Gujarati, Econometrics by Examples, Palgrave, Macmillan
Education, 2nd Edition, 2015
4. Reference Books
• R1. – Damodar. N. Gujarati and Sangeetha, Basic Econometrics, Tata McGraw-Hill Publishing
Company Limited, 4th Edition, 2007
• R2 – Wooldridge, J.M., Introductory Econometrics: A Modern. Approach, Fifth Edition. Cengage
Learning, 2016
• R3– Greene, William, H., Econometric Analysis, 8th Edition, Pearson, 2018.
• R4 – Stock, J.H. and Watson, M.W., Introduction to Econometrics, 3rd Edition, Pearson, 2018
• R5 – Koutsoyiannis, A., Theory of Econometrics, 2nd edition reprint in 2004.
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BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, Pilani
Pilani Campus
AUGS/ AGSR Division

5. Course Plan

Reference
Module Lecture/Tutorial Learning outcome
Material*
L1
A brief review of Statistical
Understanding of
concepts to be used in
1. The nature & scope of course contents and
Econometrics Course Handout
econometrics, including essential statistical
Discussion on concepts to be Review [TB1]
Review Concepts tools to understand
covered
econometrics
Tutorial 1: Overview of
Statistical Software (STATA/R)
L2–5
Simple Linear Model: Derivation
and Interpretation of Regression
2. The Simple Linear Understand the
Coefficients; The Correlation
Regression Analysis: fundamental
Coefficient; Goodness of Fit; OLS
Simple Linear Model, Chapter 1-2 (TB1) techniques and
Assumptions; Types of Data and
Properties of Regression and Class notes assumptions
Regression Model; Properties of
Coefficients and involving linear
Regression Coefficients; Gauss-
Hypothesis Testing regression
Markov Theorem; F-test
estimation (simple
Tutorial 2: Practice questions on
and multiple),
OLS estimation
interpretation of
L 6-12
coefficients;
Extension of the two-variable
construct
model; Derivation and
appropriate
Interpretation of the multiple
regression
3. Multiple Regression regression coefficients; Properties
specifications, the
Analysis including of the multiple regression Chapter 3 (TB1) and
problem of
Multicollinearity coefficients; Multicollinearity: Class notes
multicollinearity in
Consequences, Detection, &
multiple regression,
Remedial measures
and related concepts
Tutorial 3 & 5: Data
Assignments 1 and 2
Tutorial 4: Quiz 1
L 13 – 14
Basic Procedure; Logarithmic
Understand the
4. Non-Linear Models and Transformation; Non-linear
Chapter 4 (TB1) and transformation of
Transformation of Regression; Comparison Linear
Class notes variables and non-
Variables and Logarithmic Specification
linear models
Tutorial 6: Discussion on
Assignments 1 & 2 by Students
L 15 – 17
Use of Dummy Variable, Slope Introduction of
Chapter 5 (TB1) and
5. Dummy variables Dummy Variable, The Chow Test; binary variables into
Class notes
Practice Questions the regression
Tutorial 7: Data Assignment 3

2
BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, Pilani
Pilani Campus
AUGS/ AGSR Division

L 18 – 20
Model Specification; Exclusion of
Understand the
Relevant and inclusion of
6. Specification of Chapter 6 (TB1) and specification of
irrelevant variable; Proxy
Regression Variables Class notes regression variables
Variables; Testing of Linear
and model
Restriction
Tutorial 8: Practice Questions
L 21 – 25
Heteroscedasticity and its Identifying and
Implications; Tests for Detection; correcting (if
Chapter 7 (TB1) and
7. Heteroscedasticity Solutions; Prediction possible) the
Class notes
Tutorial 9: Practice problem of
questions/discussion – pre-mid heteroscedasticity
sem exam
L 26 – 29
Model with Stochastic Regressors
& changes in sample properties of Understanding
8. Stochastic Regressors Chapter 8 (TB1) and
OLS estimators; Measurement model with
& Measurement Errors Class notes
errors and instrumental variables stochastic regressors
Tutorial 10 & 11: Data
Assignment 4
L 30 – 33
Introduction to Simultaneous
Equation Models; Simultaneous Understand the
Dependence of Variables and Chapter 9 (TB1), basics of
9. Simultaneous Equations Consequences; Simultaneous Chapters 14-16 simultaneous
Estimation Bias; The Problem of (R5), and Class equation estimation
Identification notes models of
Tutorial 12: Quiz-2 econometrics.
Tutorial 13: Discussion on Data
Assignment 4
L 34 – 37
Logit & Probit Models, Understanding
10. Binary Choice Models Chapter 10 (TB1)
Introduction to Tobit Model and models with dummy
& their Estimation and Class notes
Maximum Likelihood Estimation dependent variable
Tutorial 14: Data Assignment 5
L 38 – 42
11. Introduction to Time- Models using time-series data: Basic understanding
Chapter 11, 12
series data, models, AR, MA, VAR; Autocorrelation: of models & their
(TB1), and Class
estimations, and consequences, detection, & estimation with
notes
Autocorrelation remedial measures time-series data
Tutorial 15: Quiz 3
** Tentatively, it is planned to conduct two workshops/master classes on applications of econometric methods
during the semester by an outside expert(s). The learnings gained from those workshops/master classes will
be a part of the syllabus and evaluatives.

3
BIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, Pilani
Pilani Campus
AUGS/ AGSR Division

6. Evaluation Scheme
Max. Nature of
Component Max Duration Weightage Tentative Dates*
Marks Component
Quiz – 1# 40 minutes 15 % 30 3rd Feb 2024
Mid-Semester
90 minutes 30 % 60 11th Mar 2024
Examination Closed Book
Quiz – 2# 40 minutes 15 % 30 th
6 April 2024
Quiz – 3 # 40 minutes 15 % 30 27th April 2024
Comprehensive Closed &
180 minutes 40 % 80 6th May 2024
Exam Open Book
# Best two out of three would be considered for final evaluation; * Dates are tentative and subject to
change as per the circumstances.

7. Consultation Hour: Tuesday 3 to 4 PM @ 6165D, NAB


Students can also approach the IC via email ([email protected]) and meet him with a prior
appointment. The instructor will also be available over discussion forums such as WhatsApp.

8. Notices
For course-related announcements, please check your email regularly. The same will also be communicated
during the class. Course-related extra material/notes will be uploaded on NALANDA, as required.

9. Makeup Policy
Makeup for the mid-semester exam and comprehensive examination shall be granted only in genuine cases
after a thorough examination of the makeup application by the IC. The class attendance will also be looked at
while making a decision. Only those requests who have applied before or within two days of the exam would
be entertained for a thorough examination. Please do not make any requests after the application period is
over. Also, no makeup request for the quizzes containing one buffer shall be considered.

10. Note
Quizzes and exams will be conducted during scheduled hours as specified. Changes, if any, will be
communicated well in advance. Please write/check your ID number and name before submitting any
evaluative component/request for evaluation. Failure to do so may result in unevaluated answer sheets.

Instructor-in-charge
ECON F241

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