Students of Master’s Programme in Economics (General Track). Open to other students as well.
First autumn term
After the course, the student should
- Be very familiar with the interpretation of and statistical inference in the linear regression model in the cross-sectional context
- Be familiar with the properties of the ordinary least squares, instrumental variables and the generalised method of moments estimators
- Understand the basic properties of the maximum likelihood estimator and the related asymptotic tests
- Be able to critically read empirical economic research employing methods covered in the course, to identify their potential methodological problems, to compare alternative econometric model specifications and to assess the adequacy of empirical results
- Be able to apply the models and methods covered in the course in empirical research
The course consists of lectures (24 hours) and exercises either in separate sessions or integrated into the lectures. The lectures and exercise sessions are not mandatory. The course includes a written final exam and four internet quizzes based on the homework assignments. The homework assignments consist of analytical and empirical exercises. The former familiarise the student with the theory and calculations typically required in the practical implementation of the methods, while the latter teach skills of undertaking an empirical research project, including data handling, programming and interpreting results.
The student is assumed to be familiar with the basics of the linear regression model and the principles of statistical inference to the extent covered in the basic studies in statistics and a Bachelor-level introductory course in econometrics. Familiarity with matrices is also assumed.
|Recommended optional studies
Knowledge of R (or some other matrix programming language) is useful, although the basics needed for the practical implementation of the methods can be acquired during the course.
The course builds upon a Bachelor-level introductory course in econometrics. A central goal is to deepen the knowledge on the linear regression model in various directions, including regression with instrumental variables and heteroskedastic errors. In addition, maximum likelihood estimation and the related asymptotic tests are introduced. The course starts with a review of the linear regression model and the small-sample and asymptotic properties of the ordinary least squares estimator and statistical inference concerning its parameters. In addition to inference within a given model, comparison of different specifications and model selection are considered. A large part of the course is devoted to the detection of violations of the basic assumptions of the linear regression model and their consequences for estimation methods and statistical inference. In particular, statistical inference based on the ordinary least squares estimator under heteroskedastic or autocorrelated errors as well as the instrumental variables and the generalised method of moments estimators in the case of endogenous regressors are considered. The method of maximum likelihood, applicable to many kinds of econometric estimation problems, is also introduced. Throughout the course, the emphasis is on the practical aspects of econometric modelling instead of the foundations of statistical inference. The models and methods are illustrated by means of Monte Carlo simulations and empirical applications.
|Study materials and literature
In addition to the lecture slides, selected parts of Chapters 1–6 of the textbook by Verbeek (A Guide to Modern Econometrics, 4th edition; the 2nd and 3rd editions can be used as well) as well as the manuals of the R packages covered in the course are recommended.
|Activities and teaching methods in support of learning
All material related to the course is delivered through the Moodle area of the course, which also contains a discussion forum where students can discuss issues related to the course with each other and the teacher. During the lectures, the students can post spontaneous comments and questions in the Presemo room for the course. The lectures involve a number of activating questions, also answered through Presemo. Each homework assignment involves multiple-choice questions that the students answer through Moodle before the exercise sessions related to the homework assignment.
|Assessment practices and criteria
The grade on a scale from 0 (fail) to 5 is based on the sum of points earned in the final exam and the quizzes based on the homework assignments. The maximum number of points is 100, of which 60 come from the final exam and 40 can be earned in the quizzes based on the homework assignments. To pass the course, the student must earn at least 50 points in total and at least 30 points from the final exam.