Undergraduate econometrics

For graduate students, a brief explanation of our title is in order. Our book is designed for beginning students of econometrics. It is not strictly for undergraduate students. We chose the title Undergraduate Econometrics because it clearly differentiates this book from our other, more advanced, books, and from other introductory books. We would like to reassure our first-year graduate and MBA students that the tools developed in the book, and their level of application, are relevant for tackling many practical problems in today's world.

The second edition retains much of the structure of the first edition. In particular, the first eight chapters cover the core material on simple and multiple regression, and provide a foundation for the remainder of the book. Reorganization has been designed to make the book more user friendly, and to include sorne new topics. Noteworthy additions are sections or chapters on functional forin (Chapter 6.3), specification testing (Chapter 8.6), random regressors and moment-based estimation (Chapter 13), and qualitative and limited dependent variable models (Chapter 18). The Durbin-Watson bounds test has been included. New and hopefully easier examples have been used to explain nonlinear least squares. Many more exercises, including some based on reported computer output, have been included throughout. Supplernentary support has been provided for EViews as well SAS, SHAZAM, and EXCEL. In a one-semester course, most instructors will cover Chapters 1-12 as primary material, with a selection from the remaining chapters that depends on personal preference. Some likely variations are: (i) The material on method of moments estimation in Chapter 13 will be included by instructors who wish to provide a foundation on this material for later courses; (a) Sorne instructors will prefer to omit Chapters 10.240.4 which contain a number of examples of nonlinear least squares estimation; (iii) and Instructors who ask their students to complete a term project will want to include Chapter 19. Thus, although we view Chapters 1-12 as the foundation chapters, there is considerable flexibility. The topics after Chapter 12 can be taught in any order with only minor discomfort.

Undergraduate Econometrics is designed to give students an understanding of why econornetrics is necessary, and to provide for thern a working ability with basic econometric tools such that:

(i) They can apply these tools to estimation, inference, and forecasting in the context of real world economic problems.

(u) They understand how to process information from a sample of economic data.

(iii) They can read critically the results and conclusions from others who use basic econometric tools.

(iv) They have a foundation and understanding for further study of econometrics.

(v) They have an appreciation of the range of more advanced techniques that exist and that may be covered in later econometric courses.

The book is not an econometrics cookbook, nor is it in a theorern-proof format. It ernphasizes motivation, understanding, and implementation. Motivation is achieved by introducing very simple economic models and asking economic questions that the student can answer. Understanding is aided by lucid description of techniques, clear interpretation, and appropriate applications. Leaming is reinforced by doing, with worked examples in the text and exercises at the end of each chapter. More difficult material is marked appropriately. Relatively difficult exercises are marked with an asterisk (*). Nonessential algebraic material and some relatively advanced concepts are identified by a border in the margin and end (or begin) with Skippy the Kangaroo, as an indication they can be skipped without loss of continuity.

Extensive supplementary material is available to support both students and instructors. This material includes:

1. Using EViews for Undergraduate Econometrics, 2nd Edition, by Mark Reiman and Carter Hill (ISBN 0-471-41239-2). This book presents the EViews software commands required for the examples in Undergraduate Econometrics in a clear and concise way. It is useful not only for students and instructors who will be using this software as part of their econometrics course, but also for those who wish to learn how to use EViews.

2. Using Excel for Undergraduate Econometrics, 2nd Edition, by Karen Guter muth and Carter Hill (ISBN 0-471-41237-6). This supplement explains how to use Excel to reproduce most of the examples given in Undergraduate Econometrics. Detailed instructions are provided explaining both the computations and clarifying the operations of Excel. Templates are developed for common tasks.

3. A web site (check http: //www.wiley.com/college/hill/) that can be ac cessed by students and instructors. The following material is available from. this site:

o The table of contents for the book.

o Data files (as text files) for all exercises and examples in the text.

o An alphabetical listing of all data files, with the variables in each file, and where in the book they are used.

o SAS files for the examples in the text and handouts for instructors using the SAS software.

o SHAZAM files for the examples in the text and handouts for instructors using die SHAZAM software.

o EViews workfiles for all the examples in the text.

o Extra examples with answers. a Errata for the book.

0 Links to other useful sites.

4. A CD-Rom for instructors (ISBN 0-471-40934-0) that contains:

0 Solutions to all exercises.

0 Computing help (EViews, SAS, SHAZAM, and EXCEL) for exercises.

0 Extra examples, with solutions and computing help.

0 Files in Microsoft Word and *.pdf formats, from which instructors can make transparencies for classroom use.

0 Files containing text figures in electronic format.

9 Relevant files listed above under point 2.

5. A website for instructor access only, containing:

0 The instructor's CD-Rom.

0 Extra examples and solutions, as they become available.

0 Supplementary text material for topics in, and not in, the text. Included will be (i) foundation material on statistical inference, (a) explanatory material on alternative functional forms, and the interpretation of parameters and elasticities when using different functional forins, and (iii) proofs for some of the results in Chapter 13 on random regressors and moment based estimation.

Several reviewers and colleagues have helped us improve the content of the book.

In addition to those in the Preface to the First Edition, we would like to mendon Ralph Beals, William Boal, Sugato Chakravarty, Jim Chalfant, Karen Gutermuth, Elia Kacapyr, Subal Kumbhakar, Nazma Lahf-Zaman, David Richardson, and Eric Solberg. We also gratefully acknowledge the word-processing skills of Sue Nano. Marissa Ryan from. John Wiley and Sons has been particularly supportive and helpful. < R. Carter Hill William E. Griffiths < George G. Judge

Contents

• Preface
• Chapter 1 An Introduction to Econometrics
• Chapter 2 Some Basic Probality Conceps
• Chapter 3 The Simple Lineat Regression Model :
• Specification and Estimation
• Chapter 4 Properties of the Least Square Estimators
• Chapter 5 Inference in the Simple Regression Models : Interval Estimation, Hypothesis Testing , and Prediction.
• Chapter 6 The Simple Linear Regression Model : Reporting the Results and Choosing the Functional Form
• Chapter 7 The Multiple Regression Model
• Chapter 8 Further Inference in the Multiple Regression Model
• Chapter 9 Dummy (Binary ) Variables
• Chapter 10 Nonlinear Models
• Chapter 11 Heteroskedasticity
• Chapter 12 Autocorrelation
• Chapter 13 Random Regressors and Moment Based Estimation
• Chapter 14 Simulataneous Equations Models
• Chapter 15 Distributed Lag Models
• Chapter 16 Regression with Time Series Data
• Statiscal Tables
• Index