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Econometrics Lecture 01

Dr. Sayyid Salman Rizavi is introducing a course on Econometrics. [1] He has over 19 years of teaching and research experience and degrees including a PhD in Economics from the University of Paris-Panthéon-Sorbonne. [2] The introductory course will cover basic and some advanced topics in Econometrics and utilize software for estimations. [3] Prerequisites include basic statistics, calculus, and theoretical background in economics or business.

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284 views

Econometrics Lecture 01

Dr. Sayyid Salman Rizavi is introducing a course on Econometrics. [1] He has over 19 years of teaching and research experience and degrees including a PhD in Economics from the University of Paris-Panthéon-Sorbonne. [2] The introductory course will cover basic and some advanced topics in Econometrics and utilize software for estimations. [3] Prerequisites include basic statistics, calculus, and theoretical background in economics or business.

Uploaded by

faiza
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Profile of the Instructor

Dr. Sayyid Salman Rizavi


• MA Economics (Punjab),
• M.Phil. Economics (QAU)
• MSc Computer Sciences (Punjab)
• Master in Quantitative Economics & PhD Economics
(University of Paris-Panthéon-Sorbonne, France)

Faculty Member at Hailey College of Commerce, University of


the Punjab, Lahore
Experience : 19 years teaching and research , 2.5 years banking
Introduction to the Course

Econometrics
• Introductory level
• Suitable for students of Business, Commerce, Economics, and
useful for Research students
• Bilingual presentation for a wide audience
• Covers all basic topics and some advanced topics
• Uses software for estimations
• Supplemented with lecture notes, websites & learning
modules of statistical software
Introduction to the Course

Prerequisites
• Basic Statistics and Probability

• Some Calculus like partial differentiation techniques

• Theoretical background like economics and business


Reference Books
Prescribed Text Books
• Wooldridge, J. M. (2007), Introductory Econometrics: A
Modern Approach, 3rd Edition, Thomson-South Western

• Gujarati, D. N. (2003), Basic Econometrics, 4th ed. (McGraw-


Hill: New York).

• Butt, A. Rauf, “Lest Square Estimation of Econometrics


Models”, (National Book Foundation, Islamabad)
Reference Books
Supplementary Readings
• Green, William H. (2002), Econometric Analysis, 5th Edition,
(New York University: New York).

• Salvatore, D. & Reagle, D. (2002), Statistics and


Econometrics, 2nd Edition, Schaum’s outline series,
(McGraw-Hill: New York).

• R.C. Hill, W.E. Griffiths and G.G. Judge (1993), Learning and
Practicing Econometrics (Wiley: London). [More advanced.]
Online Resources
Additional Resources
• http://www.wikihow.com/Run-Regression-Analysis-in-Microsoft-Excel

• http://www.ats.ucla.edu/stat/stata/

• http://www.ats.ucla.edu/stat/spss/

• http://data.worldbank.org/data-catalog/world-development-indicators

• http://www.oswego.edu/~kane/econometrics/
Today’s Lecture
• What is Econometrics ?
• Why should we study econometrics?
• Methodology of econometrics
• Structure of Data.
• Sources of Data.
• Software and Data Files.
What is Econometrics?
Traditional Perception
• Econometrics is the branch of economics concerned with the
use of mathematical and statistical methods in describing,
analyzing, estimating and forecasting economic relationships.
• Economic Relationships:
– Estimation of the market model (demand and supply)
– Are oil prices and the value of US dollar correlated?
– What are the determinants of growth?
– How are liquidity and profitability related?
What is Econometrics?
Modern View
• Econometrics is no more limited to economic theory but is
now used in subjects like Finance, Marketing, Management,
Sociology etc.
• Software are playing a vital and increasing role.
• Spans over qualitative and quantitative research
Using the tools of mathematics, statistics and computer sciences,
Econometrics analyses quantitative or qualitative phenomena
(from Economics or other disciplines), based on evolution and
development of theory, by recording observations based on
sampling, related by appropriate methods of inference
What is Econometrics?
Computer Software to Mathematical and
use mathematical and statistical Tools
statistical tools. like calculus,
Examples: Microsoft regression
Excel, stata, SPSS, SAS analysis etc.
etc.

Theory from
Economics,
management,
marketing,
Finance or
other
disciplines

Econometrics
Why should you study Econometrics?

• Econometrics provides research tools for your subject

• Econometrics provides empirical evidence for theoretical


statements

• Data never speaks for themselves ; Econometrics makes Data


speak
From Idea to forecasting: Idea/theory, functional form ,
specification, data collection, estimation, testing, forecasting
The Methodology of Econometrics

• Creation of a statement of theory or hypothesis

• Collection of Data

• Model Specification

• Model Estimation

• Performing Diagnostic Tests

• Testing the Hypothesis

• Prediction or Forecasting
Structure of Data

• Cross-Sectional Data: Sample of entities at a given point in


time
• Time Series Data: Observations over time
• Pooled Data / Pooled Cross Sections: Combined Cross
Sections from different years
• Panel or longitudinal Data: Time Series of each Cross Section,
Same cross sectional units are followed over time
Structure of Data

Cross-Sectional Data
Monthly Income of a sample of individuals in 2014

Respondent Income (Rupees)


Ali 75000
Faisal 42000
Iqbal 33000
Noreen 65000
Other Examples:
GDP across countries, Annual Sales of different companies in
2014 etc.
Structure of Data

Time Series Data


Monthly Income of a Person over time
Year Average Monthly Income in
Rupees
2010 35000
2011 42000
2012 47000
2013 51000
2014 55000
Other Examples: Pakistan’s GDP from 1972 to 2012, Annual Sales
of General Motors from 1985 to 2012 etc.
Structure of Data

Pooled Data / Pooled Cross Sections


Monthly income of respondents from 2011 to 2013
Sample year Respondent Income (Rupees
monthly average)
2011 Ali 75000
2011 Iqbal 42000
2012 Salma 74000
2012 Kumail 68000
2013 Sultan 80000
2013 Lubna 83000

Note that individual may change in different years


Structure of Data
Panel or longitudinal Data
Exchange Rate of different countries over time
Source: Penn World Tables
Country Year Exchange Rate to US dollar
Indonesia 2008 9698.96
Indonesia 2009 10389.9
Indonesia 2010 9090.43
Pakistan 2008 70.40803
Pakistan 2009 81.71289
Pakistan 2010 85.19382
Sri Lanka 2008 108.3338
Sri Lanka 2009 114.9448
Sri Lanka 2010 113.0661

Note: Individual entities (countries) do not change over time


Sources of Data

You can just google for the following and find economic and
financial data
• World Development Report
• World Development Indicators
• International Financial Statistics
• Penn World Tables
• US time use Survey
• Panel Survey of Income Dynamics
• http://finance.gov.pk (Ministry of Finance, Pakistan)
• http://sbp.org.pk (State Bank of Pakistan)
Software and Data files

• Microsoft Excel (.xls or .xlsx)


• SPSS (.sav)
• Stata (.dat)

• .csv (Comma Separated values / character separated values)


• .xml (extensible markup language)
Thank you Very Much

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