G Lecture01

1.
Week 1
Introduction
Econometrics
Analysis
All rights reserved by Dr.Bill Wan Sing Hung - HKBU
1.2
1. Economics Theory
Keynes postulated a positive relationship between consumption
and incomes, i.e., peoples income
2. Mathematical Expression:
Consumption = f(Income) ==> C = f(Y)
MPC = dC/dY = f(Y) > 0 ;assume 0 < MPC < 1
3. Statistics:
Year
1980
1981
.
2000
C
2447.1
2476.9
.
4651.8
Y
3776.3
3841.1
.
5991.7
Find the mean, variance,

standard deviation,
correlation, etc.
4. Econometric - Regression model

Ct = 1 + 2 Yt + ut
=> C/Y = 1
=> estimating the relationship
1.3
The Role of Econometrics

Provide measurement and quantitative
analysis of actual economic phenomena
or economic relationship based on
1. Economic theory
2. Economic data
3. Methods of model constructed
1.4
Economic Relationships:
money supply
Stock Market Index
government
budget
Interest rate
inflation
Wage
Exchange
Rate
trade
deficit
Properties Market
unemployment
capital gains tax
crime rate
rent
control
laws
Economic Decisions
To use information effectively:
economic theory
economic data
economic
decisions
*Econometrics* helps us combine

economic theory and economic data .
1.5
The Consumption Function
1.6
Consumption, C, is some function of income, i :
c = f(i)
For applied econometric analysis
this consumption function must be
specified more precisely.
1.7
demand, qd, for an individual commodity:
qd = f( p, pc, ps, i )
demand
p = own price; pc = price of complements;

ps = price of substitutes; i = income
supply, qs, of an individual commodity:
qs = f( p, pc, pf, ps )
supply
p = own price; pc = price of complement products;

ps = price of substitutes; pf = price of factor inputs
1.8
How
How much
much ??
Listing the variables in an economic relationship is not enough.
For effective policy we must know the amount of change
needed for a policy instrument to bring about the desired
effect:
By how much should the Federal Reserve
raise interest rates to prevent inflation?
By how much can the price of football tickets
be increased and still fill the stadium?
1.9
Answering the How Much? question
Need to estimate parameters
that are both:
1. unknown
and
2. unobservable
1.10
The Statistical Model

Average or systematic behavior
over many individuals or many firms.
Not a single individual or single firm.
Economists are concerned with the
unemployment rate and not whether
a particular individual gets a job.
1.11
The Statistical Model

Actual vs. Predicted Consumption:
Actual = systematic part + random error
Consumption, c, is function, f, of income, i, with error, u:
c = f(i) + u
Systematic part provides prediction, f(i),
but actual will miss by random error, u.
The Consumption Function

c = f(i) + u
Need to define f(i) in some way.
To make consumption, c,
a linear function of income, i :
f(i) = 1 + 2i
The statistical model then becomes:
c = 1 + 2i + u
1.12
The Wage Function
1.13
W = f(X) + u
Where X can represent a group of variables such
education, experience, and training, etc.
f(X) = 1 + 2 educ + 3 experi + 4 training
The statistical estimation model then becomes:
W = 1 + 2 educ + 3 experi + 4 training + u
1.14
The Econometric Model

y = 1 + 2 X2 + 3 X3+ u
Dependent variable, y, is focus of study
(predict or explain changes in dependent variable).
Explanatory variables, X1 and X2, help us explain
observed changes in the dependent variable.
1.15
Terminology and Notation
Y =
1 + 2 X + u
Left hand-side
Variable:
Right hand-side
Variable:
Dependent
Explained
Predictand
Regressand
Response
Endogenous
Explanatory
Independent
Predictor
Regressor
Stimulus or control
Exogenous
1.16
Statistical Models
Controlled (experimental)
vs.
Uncontrolled (observational)
Controlled experiment (pure science) explaining mass, Y :
pressure, X1, held constant when varying temperature, X2,
and vice versa.
Uncontrolled experiment (econometrics) explaining consumption, Y: price, X1, and income, X2, vary at the same time.
1.17
Econometric model
economic model
economic variables and parameters.
statistical model
sampling process with its parameters.
data
observed values of the variables.
Time series data
1.18
Cross-section data and Pool (Panel) data
1.19
1.20
The Practice of Econometrics

Statement of theory or hypothesis
Specification of the mathematical model of the
theory
Specification of the econometric model of the
theory
Obtaining data for the analysis.
Estimation with statistical properties.
Hypothesis testing
Analyze and evaluate implications of the results
Forecasting or prediction
Using the model for control or policy purpose
1.21
Economic Empirical Study

Economic Theory; Past Experience, studies
Formulating a model: Cause - effect
Gathering data:
C = f(Inc) ==>
Ct = 1 + 2Inct + ut
Statistics monthly, quarterly, yearly data
Estimating the model:
Simple OLS method or other advances
Testing the hypothesis:
H0: 2>0,
positive relationship or not If not true
Interpreting the results:

Forecasting
Policy implication and decisions


G Lecture01

Încărcat de

Informații document

Descriere originală:

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

G Lecture01

Încărcat de

Drepturi de autor:

Formate disponibile

1.

Find the mean, variance,

4. Econometric - Regression model

The Role of Econometrics

Stock Market Index

*Econometrics* helps us combine

The Consumption Function

Consumption, C, is some function of income, i :

p = own price; pc = price of complements;

p = own price; pc = price of complement products;

All rights reserved by Dr.Bill Wan Sing Hung - HKBU

The Statistical Model

The Statistical Model

The Consumption Function

The Wage Function

The Econometric Model

Time series data

All rights reserved by Dr.Bill Wan Sing Hung - HKBU

Cross-section data and Pool (Panel) data

All rights reserved by Dr.Bill Wan Sing Hung - HKBU

The Practice of Econometrics

Economic Empirical Study

Statistics monthly, quarterly, yearly data

Estimating the model:

Simple OLS method or other advances

Testing the hypothesis:

Interpreting the results:

Policy implication and decisions

S-ar putea să vă placă și

Econometrics helps us combine