Introductory Econometrics with Applications

ISBN-10: 0030341868

ISBN-13: 9780030341861

Edition: 5th 2002

Authors: Ramu Ramanathan

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Offers an ideal combination of econometric theory and hands-on practical training for undergraduate and graduate courses. The authors ambition is to provide realistic applications without sacrificing theoretical underpinnings. He uses a logical step-by-step approach to walk readers through numerous real-world examples of model specification, estimation, and hypothesis testing. The book also succeeds at being self-contained. By including background information on mathematics, probability, statistics, and software applications, readers have all the information they need in one place.
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Book details

Edition: 5th
Copyright year: 2002
Publisher: Harcourt College Publishers
Binding: Hardcover
Weight: 3.124
Language: English

Backgroundp. 1
Introductionp. 1
What Is Econometrics?p. 2
Basic Ingredients of an Empirical Studyp. 4
Empirical Projectp. 13
Summaryp. 14
Key Termsp. 15
Exercisesp. 15
Review of Probability and Statisticsp. 16
Random Variables and Probability Distributionsp. 16
Mathematical Expectation, Mean, and Variancep. 20
Joint Probabilities, Covariance, and Correlationp. 26
Random Sampling and Sampling Distributionsp. 35
Procedures for the Estimation of Parametersp. 38
Properties of Estimatorsp. 42
The Chi-square, t-and F-distributionsp. 47
Testing Hypothesesp. 50
Interval Estimationp. 56
Key Termsp. 58
Referencesp. 59
Exercisesp. 60
Miscellaneous Derivationsp. 63
Certain Useful Results on Summationsp. 63
Maximization and Minimizationp. 64
More on Estimationp. 71
Basicsp. 75
The Simple Linear Regression Modelp. 76
The Basic Modelp. 76
Estimation of the Basic Model by the Method of Ordinary Least Squares (OLS)p. 80
Properties of Estimatorsp. 85
The Precision of the Estimators and the Goodness of Fitp. 91
Tests of Hypothesesp. 95
Scaling and Units of Measurementp. 105
Application: Estimating an Engel Curve Relation between Expenditure on Health Care and Incomep. 106
Confidence Intervalsp. 110
Forecastingp. 110
Causality in a Regression Modelp. 113
Application: Relation between Patents and the Expenditures on Research and Development (RandD)p. 116
Summaryp. 119
Key Termsp. 121
Referencesp. 122
Exercisesp. 122
Miscellaneous Derivationsp. 133
Three-Dimensional Representation of the Simple Linear Modelp. 133
More Results on Summationsp. 133
Derivation of the Normal Equations by Least Squaresp. 135
Best Linear Unbiased Estimator (BLUE) and the Gauss-Markov Theoremp. 135
Maximum Likelihood Estimationp. 137
Derivation of the Variances of the Estimatorsp. 138
Unbiased Estimator of the Variance of the Error Termp. 139
Derivation of Equation 3.26p. 140
Derivation of Equation 3.27ap. 140
Proof That r[superscript 2 subscript xy]=R[superscript 2] for a Simple Regression Modelp. 141
Derivation of Equation 3.29p. 142
Derivation of Equation 3.30p. 143
Multiple Regression Modelsp. 144
Normal Equationsp. 145
Goodness of Fitp. 148
General Criteria for Model Selectionp. 151
Testing Hypothesesp. 153
Specification Errorsp. 165
Application: The Determinants of the Number of Bus Travelersp. 171
Application: Women's Labor Force Participationp. 177
Empirical Example: Net Migration Rates and the Quality of Lifep. 183
Empirical Projectp. 185
Summaryp. 185
Key Termsp. 187
Referencesp. 187
Exercisesp. 188
Miscellaneous Derivationsp. 205
The Three-Variable Regression Modelp. 205
Bias Due to the Omission of a Relevant Variablep. 206
Proof of Property 4.4p. 208
Multicollinearityp. 210
Examples of Multicollinearityp. 210
Exact Multicollinearityp. 213
Near Multicollinearityp. 214
Applicationsp. 220
Summaryp. 225
Key Termsp. 226
Referencesp. 226
Exercisesp. 227
Derivation of Equations (5.4) through (5.6)p. 229
Extensionsp. 231
Choosing Functional Forms and Testing for Model Specificationp. 232
Review of Exponential and Logarithmic Functionsp. 232
Linear-Log Relationshipp. 235
Reciprocal Transformationp. 238
Polynomial Curve-Fittingp. 238
Interaction Termsp. 241
Lags in Behavior (Dynamic Models)p. 243
Application: Relation between Patents and RandD Expenses Revisitedp. 244
Log-Linear Relationship (or Semilog Model)p. 250
Comparison of R[superscript 2] Values between Modelsp. 254
The Double-Log (or Log-Log) Modelp. 255
Application: Estimating Elasticities of Bus Travelp. 257
Miscellaneous Other Modelsp. 258
The Hendry/LSE Approach of Modeling from "General to Simple"p. 261
"Simple to General" Modeling Using the Lagrange Multiplier Testp. 262
Ramsey's RESET Procedure for Regression Specification Errorp. 270
Summaryp. 271
Key Termsp. 272
Referencesp. 272
Exercisesp. 274
More Details on LR, Wald, and LM Testsp. 284
Likelihood Ratio Testp. 284
The Wald Testp. 286
The Lagrange Multiplier Testp. 287
Qualitative (or Dummy) Independent Variablesp. 290
Qualitative Variables with Two Categories Onlyp. 290
Qualitative Variable with Many Categoriesp. 298
The Effect of Qualitative Variables on the Slope Term (Analysis of Covariance)p. 302
Application: Covariance Analysis of the Wage Modelp. 305
Estimating Seasonal Effectsp. 312
Testing for Structural Changep. 314
Empirical Example: Motor Carrier Deregulationp. 320
Application: The Demand for a Sealant Used in Constructionp. 320
Empirical Projectp. 324
Summaryp. 325
Key Termsp. 325
Referencesp. 325
Exercisesp. 326
Some Special Issues with Cross-Section and Time Series Datap. 343
Heteroscedasticityp. 344
Consequences of Ignoring Heteroscedasticityp. 346
Testing for Heteroscedasticityp. 347
Estimation Proceduresp. 355
Application: A Model of the Expenditure on Health Care in the United Statesp. 363
Empirical Projectp. 365
Summaryp. 366
Key Termsp. 367
Referencesp. 367
Exercisesp. 368
Properties of OLS Estimators in the Presence of Heteroscedasticityp. 378
Serial Correlationp. 380
Serial Correlation of the First Orderp. 382
Consequences of Ignoring Serial Correlationp. 383
Testing for First-Order Serial Correlationp. 386
Treatment of Serial Correlationp. 389
Higher-Order Serial Correlationp. 398
Engle's ARCH Testp. 401
Application: Demand for Electricityp. 406
Summaryp. 416
Key Termsp. 417
Referencesp. 417
Exercisesp. 419
Miscellaneous Derivationsp. 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 Modelsp. 434
Lagged Independent Variablesp. 434
Lagged Dependent Variablesp. 442
Lagged Dependent Variables and Serial Correlationp. 446
Estimation of Models with Lagged Dependent Variablesp. 449
Application: A Dynamic Model of Consumption Expenditures in the United Kingdomp. 453
Application: Hourly Electricity Load Model Revisitedp. 454
Unit Roots and the Dickey-Fuller Testsp. 455
Error Correction Models (ECM)p. 461
Application: An Error Correction Model of U.S. Defense Expendituresp. 464
Cointegrationp. 472
Causalityp. 475
Pooling Cross-Sectional and Time Series Data (or Panel Data)p. 478
Empirical Projectp. 481
Summaryp. 482
Key Termsp. 484
Referencesp. 484
Exercisesp. 487
Special Topicsp. 493
Forecastingp. 494
Fitted Values Ex-post, and Ex-ante Forecastsp. 495
Evaluation of Modelsp. 496
Conditional and Unconditional Forecastsp. 497
Forecasting from Time Trendsp. 498
Combining Forecastsp. 504
Forecasting from Econometric Modelsp. 510
Forecasting from Time Series Modelsp. 514
Summaryp. 524
Key Termsp. 525
Referencesp. 526
Exercisesp. 527
Qualitative and Limited Dependent Variablesp. 528
Linear Probability (or Binary Choice) Modelsp. 529
The Probit Modelp. 530
The Logit Modelp. 532
Limited Dependent Variablesp. 534
Summaryp. 538
Key Termsp. 539
Referencesp. 539
Exercisesp. 539
Simultaneous Equation Modelsp. 542
Structure and Reduced Forms of Simultaneous Equation Modelsp. 542
Consequences of Ignoring Simultaneityp. 544
The Identification Problemp. 546
Estimation Proceduresp. 551
Empirical Example: Regulation in the Contact Lens Industryp. 556
Application: A Simple Keynesian Modelp. 558
Summaryp. 561
Key Termsp. 561
Referencesp. 562
Exercisesp. 562
Derivation of the Limits for OLS Estimatesp. 565
Practicep. 567
Carrying Out an Empirical Projectp. 568
Selecting a Topicp. 568
Review of Literaturep. 573
Formulating a General Modelp. 574
Collecting the Datap. 574
Empirical Analysisp. 579
Key Termsp. 582
Referencesp. 583
Statistical Tablesp. 585
Answers to Selected Problemsp. 607
Practice Computer Sessionsp. 635
Descriptions of the Data and Practice Computer Sessionsp. 639
Copyrights and Acknowledgmentsp. 675
Name Indexp. 677
Subject Indexp. 679
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