Background | p. 1 |
Introduction | p. 1 |
What Is Econometrics? | p. 2 |
Basic Ingredients of an Empirical Study | p. 4 |
Empirical Project | p. 13 |
Summary | p. 14 |
Key Terms | p. 15 |
Exercises | p. 15 |
Review of Probability and Statistics | p. 16 |
Random Variables and Probability Distributions | p. 16 |
Mathematical Expectation, Mean, and Variance | p. 20 |
Joint Probabilities, Covariance, and Correlation | p. 26 |
Random Sampling and Sampling Distributions | p. 35 |
Procedures for the Estimation of Parameters | p. 38 |
Properties of Estimators | p. 42 |
The Chi-square, t-and F-distributions | p. 47 |
Testing Hypotheses | p. 50 |
Interval Estimation | p. 56 |
Key Terms | p. 58 |
References | p. 59 |
Exercises | p. 60 |
Miscellaneous Derivations | p. 63 |
Certain Useful Results on Summations | p. 63 |
Maximization and Minimization | p. 64 |
More on Estimation | p. 71 |
Basics | p. 75 |
The Simple Linear Regression Model | p. 76 |
The Basic Model | p. 76 |
Estimation of the Basic Model by the Method of Ordinary Least Squares (OLS) | p. 80 |
Properties of Estimators | p. 85 |
The Precision of the Estimators and the Goodness of Fit | p. 91 |
Tests of Hypotheses | p. 95 |
Scaling and Units of Measurement | p. 105 |
Application: Estimating an Engel Curve Relation between Expenditure on Health Care and Income | p. 106 |
Confidence Intervals | p. 110 |
Forecasting | p. 110 |
Causality in a Regression Model | p. 113 |
Application: Relation between Patents and the Expenditures on Research and Development (RandD) | p. 116 |
Summary | p. 119 |
Key Terms | p. 121 |
References | p. 122 |
Exercises | p. 122 |
Miscellaneous Derivations | p. 133 |
Three-Dimensional Representation of the Simple Linear Model | p. 133 |
More Results on Summations | p. 133 |
Derivation of the Normal Equations by Least Squares | p. 135 |
Best Linear Unbiased Estimator (BLUE) and the Gauss-Markov Theorem | p. 135 |
Maximum Likelihood Estimation | p. 137 |
Derivation of the Variances of the Estimators | p. 138 |
Unbiased Estimator of the Variance of the Error Term | p. 139 |
Derivation of Equation 3.26 | p. 140 |
Derivation of Equation 3.27a | p. 140 |
Proof That r[superscript 2 subscript xy]=R[superscript 2] for a Simple Regression Model | p. 141 |
Derivation of Equation 3.29 | p. 142 |
Derivation of Equation 3.30 | p. 143 |
Multiple Regression Models | p. 144 |
Normal Equations | p. 145 |
Goodness of Fit | p. 148 |
General Criteria for Model Selection | p. 151 |
Testing Hypotheses | p. 153 |
Specification Errors | p. 165 |
Application: The Determinants of the Number of Bus Travelers | p. 171 |
Application: Women's Labor Force Participation | p. 177 |
Empirical Example: Net Migration Rates and the Quality of Life | p. 183 |
Empirical Project | p. 185 |
Summary | p. 185 |
Key Terms | p. 187 |
References | p. 187 |
Exercises | p. 188 |
Miscellaneous Derivations | p. 205 |
The Three-Variable Regression Model | p. 205 |
Bias Due to the Omission of a Relevant Variable | p. 206 |
Proof of Property 4.4 | p. 208 |
Multicollinearity | p. 210 |
Examples of Multicollinearity | p. 210 |
Exact Multicollinearity | p. 213 |
Near Multicollinearity | p. 214 |
Applications | p. 220 |
Summary | p. 225 |
Key Terms | p. 226 |
References | p. 226 |
Exercises | p. 227 |
Derivation of Equations (5.4) through (5.6) | p. 229 |
Extensions | p. 231 |
Choosing Functional Forms and Testing for Model Specification | p. 232 |
Review of Exponential and Logarithmic Functions | p. 232 |
Linear-Log Relationship | p. 235 |
Reciprocal Transformation | p. 238 |
Polynomial Curve-Fitting | p. 238 |
Interaction Terms | p. 241 |
Lags in Behavior (Dynamic Models) | p. 243 |
Application: Relation between Patents and RandD Expenses Revisited | p. 244 |
Log-Linear Relationship (or Semilog Model) | p. 250 |
Comparison of R[superscript 2] Values between Models | p. 254 |
The Double-Log (or Log-Log) Model | p. 255 |
Application: Estimating Elasticities of Bus Travel | p. 257 |
Miscellaneous Other Models | p. 258 |
The Hendry/LSE Approach of Modeling from "General to Simple" | p. 261 |
"Simple to General" Modeling Using the Lagrange Multiplier Test | p. 262 |
Ramsey's RESET Procedure for Regression Specification Error | p. 270 |
Summary | p. 271 |
Key Terms | p. 272 |
References | p. 272 |
Exercises | p. 274 |
More Details on LR, Wald, and LM Tests | p. 284 |
Likelihood Ratio Test | p. 284 |
The Wald Test | p. 286 |
The Lagrange Multiplier Test | p. 287 |
Qualitative (or Dummy) Independent Variables | p. 290 |
Qualitative Variables with Two Categories Only | p. 290 |
Qualitative Variable with Many Categories | p. 298 |
The Effect of Qualitative Variables on the Slope Term (Analysis of Covariance) | p. 302 |
Application: Covariance Analysis of the Wage Model | p. 305 |
Estimating Seasonal Effects | p. 312 |
Testing for Structural Change | p. 314 |
Empirical Example: Motor Carrier Deregulation | p. 320 |
Application: The Demand for a Sealant Used in Construction | p. 320 |
Empirical Project | p. 324 |
Summary | p. 325 |
Key Terms | p. 325 |
References | p. 325 |
Exercises | p. 326 |
Some Special Issues with Cross-Section and Time Series Data | p. 343 |
Heteroscedasticity | p. 344 |
Consequences of Ignoring Heteroscedasticity | p. 346 |
Testing for Heteroscedasticity | p. 347 |
Estimation Procedures | p. 355 |
Application: A Model of the Expenditure on Health Care in the United States | p. 363 |
Empirical Project | p. 365 |
Summary | p. 366 |
Key Terms | p. 367 |
References | p. 367 |
Exercises | p. 368 |
Properties of OLS Estimators in the Presence of Heteroscedasticity | p. 378 |
Serial Correlation | p. 380 |
Serial Correlation of the First Order | p. 382 |
Consequences of Ignoring Serial Correlation | p. 383 |
Testing for First-Order Serial Correlation | p. 386 |
Treatment of Serial Correlation | p. 389 |
Higher-Order Serial Correlation | p. 398 |
Engle's ARCH Test | p. 401 |
Application: Demand for Electricity | p. 406 |
Summary | p. 416 |
Key Terms | p. 417 |
References | p. 417 |
Exercises | p. 419 |
Miscellaneous Derivations | p. 431 |
Proof That the DW d is Approximately 2(1-[rho]) | p. 431 |
Properties of u[subscript t] When It Is AR(1) | p. 431 |
Treatment of the First Observation under AR(1) | p. 432 |
Distributed Lag Models | p. 434 |
Lagged Independent Variables | p. 434 |
Lagged Dependent Variables | p. 442 |
Lagged Dependent Variables and Serial Correlation | p. 446 |
Estimation of Models with Lagged Dependent Variables | p. 449 |
Application: A Dynamic Model of Consumption Expenditures in the United Kingdom | p. 453 |
Application: Hourly Electricity Load Model Revisited | p. 454 |
Unit Roots and the Dickey-Fuller Tests | p. 455 |
Error Correction Models (ECM) | p. 461 |
Application: An Error Correction Model of U.S. Defense Expenditures | p. 464 |
Cointegration | p. 472 |
Causality | p. 475 |
Pooling Cross-Sectional and Time Series Data (or Panel Data) | p. 478 |
Empirical Project | p. 481 |
Summary | p. 482 |
Key Terms | p. 484 |
References | p. 484 |
Exercises | p. 487 |
Special Topics | p. 493 |
Forecasting | p. 494 |
Fitted Values Ex-post, and Ex-ante Forecasts | p. 495 |
Evaluation of Models | p. 496 |
Conditional and Unconditional Forecasts | p. 497 |
Forecasting from Time Trends | p. 498 |
Combining Forecasts | p. 504 |
Forecasting from Econometric Models | p. 510 |
Forecasting from Time Series Models | p. 514 |
Summary | p. 524 |
Key Terms | p. 525 |
References | p. 526 |
Exercises | p. 527 |
Qualitative and Limited Dependent Variables | p. 528 |
Linear Probability (or Binary Choice) Models | p. 529 |
The Probit Model | p. 530 |
The Logit Model | p. 532 |
Limited Dependent Variables | p. 534 |
Summary | p. 538 |
Key Terms | p. 539 |
References | p. 539 |
Exercises | p. 539 |
Simultaneous Equation Models | p. 542 |
Structure and Reduced Forms of Simultaneous Equation Models | p. 542 |
Consequences of Ignoring Simultaneity | p. 544 |
The Identification Problem | p. 546 |
Estimation Procedures | p. 551 |
Empirical Example: Regulation in the Contact Lens Industry | p. 556 |
Application: A Simple Keynesian Model | p. 558 |
Summary | p. 561 |
Key Terms | p. 561 |
References | p. 562 |
Exercises | p. 562 |
Derivation of the Limits for OLS Estimates | p. 565 |
Practice | p. 567 |
Carrying Out an Empirical Project | p. 568 |
Selecting a Topic | p. 568 |
Review of Literature | p. 573 |
Formulating a General Model | p. 574 |
Collecting the Data | p. 574 |
Empirical Analysis | p. 579 |
Key Terms | p. 582 |
References | p. 583 |
Statistical Tables | p. 585 |
Answers to Selected Problems | p. 607 |
Practice Computer Sessions | p. 635 |
Descriptions of the Data and Practice Computer Sessions | p. 639 |
Copyrights and Acknowledgments | p. 675 |
Name Index | p. 677 |
Subject Index | p. 679 |
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