JOURNAL OF APPLIED ECONOMETRICS

J. Appl. Econ. 21: 1103 1107 (2006)

Published online in Wiley InterScience
(www.interscience.wiley.com) DOI: 10.1002/jae.927

TEACHING UNDERGRADUATE ECONOMETRICS WITH

GRETL
J. WILSON MIXON JR* AND RYAN J. SMITH
Department of Economics, Berry College, Mount Berry, Georgia, USA

SUMMARY
This paper reviews GRETL, a software package for econometrics. Mainly it discusses GRETLs merits
as an aid in teaching undergraduate econometrics. This discussion is in two parts. First one author, an
instructor, reviews the teaching of undergraduate econometrics with GRETL. Then the second author, a
student, discusses the experience of being introduced to GRETL as part of the introductory course and of
putting it to work as part of his employment. The paper briefly discusses GRETL as a research tool. Copyright
2006 John Wiley & Sons, Ltd.

1. INTRODUCTION
GRETL (Gnu Regression, Econometrics and Time-series Library) is an econometrics package
that claims the following merits (excerpted from Cottrell, 2004, p. 1): user-friendly (easy to
download and install, accompanied by numerous datasets), flexible (user may choose GUI or
batch processing), cross-platform (Linux and other Unix-like systems, MS Windows, and Mac OS
X), open source, reasonably sophisticated (see Table I), accurate (tested on the NIST reference
datasets), Internet ready (can access databases from a central server), and international (output in
English, Italian, French, Spanish, Polish, and German).
As GRETLs author says (in an email message to a GRETL users mailing list, July 14, 2005),
My (immodest) notion is that GRETL should be an extremely user-friendly econometrics . . .
package with true cross-platform GUI functionality and also solid support for scripting. It should
be a flagship for free, open-source software in the statistical domaina program which many
users might prefer to expensive proprietary alternatives (I have some evidence that this is true
Correspondence to: J. Wilson Mixon Jr, Department of Economics, Berry College, Mount Berry, GA 30149, USA.
E-mail: wmixon@berry.edu

Copyright 2006 John Wiley & Sons, Ltd.

1104

J. W. MIXON JR AND R. J. SMITH

Table I. Estimation options available via GRETLs GUI

Option

Comments

Ordinary least squares

Weighted least squares
Heteroskedasticity-corrected
least squares
Time-series estimation

Optional robust standard errors. Large set of tests; see Table II

Weights based on a user-specified variable
Estimation based on procedure described in Ramanathan (2002)

Logit and probit

Tobit
Poisson
Logistic
Least-absolute deviation
estimation
Analysis of pooled data
Nonlinear least squares
estimation
Maximum-likelihood
estimation
Systems estimation

Along with CochraneOrcutt, HildrethLu, and PraisWinsten techniques, it

offers autoregressive estimation, ARIMA, GARCH, vector autoregression,
vector error-correction models, and cointegration tests
Binomial only
Limited to zero lower bound, no upper bound. Does not report estimated
marginal effects
For count data
Transforms dependent variable as y D ln
y/
y max
y with user-specified y max .
All y values must be positive
Alternative to OLS when distribution tails are fat
Statistics for random-effects and fixed-effects models
With or without user-specified analytical derivatives
User-specified log-likelihood function
OLS, WLS, 2SLS, SUR, 3SLS, FIML, and LIML

already). The author is Allin Cottrell of Wake Forest University. Much of the material added to
GRETL recently is due to Riccardo Lucchetti of the Universit`a Politecnica delle Marche.
This review endorses two claims regarding GRETL, namely, that it is user-friendly and that
it is reasonably sophisticated. It discusses GRETLs capabilities, supporting Professor Cottrells
assessment. Most of the review relates the authors experiences with GRETL as a teaching tool.
It then briefly considers the use of GRETL in research.
One author has taught undergraduate econometrics for 20 years; the other recently completed
an undergraduate econometrics course. Accordingly, we follow a discussion of the instructors
view of GRETLs merits and suggestions for its incorporation into an introductory course with a
first-time users comments regarding GRETLs usefulness.

2. INSTRUCTORS OBSERVATIONS
Because GRETL is easily acquired and installed, it can be used in the classroom, with students
doing much of the hands-on work. It can be installed on any computer that students use without
concerns about licenses, keeping track of a CD, or affordability. The ease of use allows students
to complete homework exercises in a straightforward fashion. Thus the software becomes an aid
to students learning rather than a barrier to overcome.
GRETL offers the power to perform the procedures typically developed in an introductory
course. Table I shows the GUI Model menu options along with brief comments. Other menus are
File, Utilities, Session, Data, Sample, and Variable.
Copyright 2006 John Wiley & Sons, Ltd.

J. Appl. Econ. 21: 1103 1107 (2006)

DOI: 10.1002/jae

1105

SOFTWARE REVIEW

Table II. Tests available for OLS estimation

Test

Comments

Omit/add variables

Re-estimates model after variable(s) are omitted or added. Provides statistics for
comparing specifications
Provides sum of estimated coefficients and its standard error, and tests hypothesis
that the true sum is zero
Imposes and tests linear restrictions on the coefficients
Tests against squares and logarithms
A general test for functional form specification
Whites test

Sum of coefficients
Linear restrictions
Tests for linearity
Ramseys RESET
Heteroskedasticity
Normality of the error terms
Influential observations
Collinearity
Chow test
Autocorrelation
Autoregressive conditional
heteroskedasticity
(ARCH)
CUSUM test for parameter
stability

Histogram of residuals and  2 test

Leverage, influence, and DFITS statistics. (These may be added to the dataset
and used for selecting subsets)
Variance inflation factors for independent variables
Given a user-specified split point in the dataset, GRETL conducts a full Chow
test for an OLS model
BreuschGodfrey test for autocorrelation up to a user-specified order
Tests for presence of ARCH up to a user-specified order. Returns WLS (ARCH)
estimates of parameters
Tabular and graphic output

Baiocchi and Distaso (2003) noted GRETLs relatively limited offerings for time-series analysis,
but they predicted (p. 110) that the open source nature of the software should ensure that . . . new
econometric procedures will be added. Indeed, this is currently happening. One recent addition
to the GUI is maximum-likelihood estimation. Previously, it had been available via the command
line. Also, systems estimation has been added to the GUI. This addition does not make estimation
much easier for the new user, however, because some programming is still required. An instructor
who has introduced students to systems estimations via the GUI might wish to show them the
command-line option (the GRETL console).
Once a model has been estimated using any procedure listed in Table I, GRETL presents an
appropriate set of test options, in addition to the default set of test statistics produced as standard
output. Table II shows the set of tests that may apply with OLS estimation. The tests are offered
in a way that makes them readily accessible to novice users.
Instructors using GRETL might wish to introduce students to batch programming. Once the
newly trained analyst leaves the classroom and faces the same set of data repeatedly, batch entry
of commands becomes more attractive than using a GUI. GRETL allows the entry of commands
in batch mode, as well as the editing and execution of previously created batch files. Of interest
to many instructors, the manual provides useful tips for executing Monte Carlo studies within
GRETL.
Many useful datasets accompany GRETL. Some are incorporated into the package. Others are
from textbooks by Davidson and MacKinnon (2004), Greene (2003), Gujarati (2002), Ramanathan
(2002), Stock and Watson (2003), and Wooldridge (2003). Some texts have datasets with hundreds
of observations (thousands in a few cases), and much larger datasets are easily obtained.
Copyright 2006 John Wiley & Sons, Ltd.

J. Appl. Econ. 21: 1103 1107 (2006)

DOI: 10.1002/jae

1106

J. W. MIXON JR AND R. J. SMITH

3. STUDENTS EXPERIENCE
I used GRETL both in the classroom and, during the following summer, in an on-the-job
application. My previous experience with statistical analysis was limited to Microsoft Excel. Using
GRETL in the classroom, in homework exercises, and on the job, I encountered first hand the
learning curve involved with mastering an econometrics package. GRETL was relatively simple
to operate, especially with some direction from the instructor. It was difficult for me to thoroughly
understand the actions behind the screens of GRETL, however, and implications of the various
options were not apparent to me. In other words, GRETLs help feature was not satisfying my
needs. I concluded that additional assistance was needed for beginners. (Instructors note: GRETL
provides an extensive set of options. Most are well documented and accessible online. Even so,
these are mystifying to first-time users of an econometrics package. My impression is that GRETL
is on a par with other packages in this regard. See Mixon and Smith, 2006, for a graphical overview
of GRETL.)
During the summer following my econometrics course, I conducted a consulting project for a
national trucking firm. I used GRETL to perform analysis for the firms maintenance associates.
Entering data into GRETL, estimating a set of probability models (I used both the linear probability
model and probit), and developing a report based on my findings were facilitated by my having
completed an econometrics course using GRETL.
The experience of one of my classmates is pertinent. He reports, in personal correspondence, I
have recently started a new job in the employment law division at [a law firm] doing statistical
analysis. . . . [T]hey are impressed with my exposure to regression analysis, and I actually did put
GRETL on my PC at work.

4. GRETL AS A RESEARCH TOOL

GRETL can be a useful research tool. Much of what applied econometricians do can be
accomplished directly within GRETL. For more advanced procedures, GRETL can be used in
conjunction with R, an econometrics software package. Racine and Hyndman (2002) offer an
overview of R, sometimes called GNU-S. (A useful overview of free softwares advantages appears
in Baiocchi and Distaso, 2003.)
Researchers requiring only ordinary least squares and generalized least squares techniques will
find GRETL both adequate and accessible. The use of the command line provides numerous
methods of estimating systems of equations: OLS, SUR, TSLS, 3SLS, FIML, or LIML. Testing
linear restrictions on coefficient values, including cross-equation restrictions, is a direct matter. A
large and growing array of time-series features makes GRETL an attractive option for researchers
engaged in this type of analysis.
GRETLs limited dependent variables techniques are adequate for teaching, but they might
be inadequate for much research. A procedure for tobit is available, but it is limited to a zerovalued lower bound. Both logit and probit are available for equations with binomial dependent
variables, but neither extends to multinomial specifications. Currently (Version 1.5.1) GRETL does
not support Heckit estimation of models with endogenous sample selection, but this technique
is a forthcoming addition.
GRETL can handle large datasets. Professor Cottrell says (in private correspondence) that
GRETL should be able to handle over two billion observations, provided sufficient RAM. He
reports having worked on datasets of the following sizes: 59 960 observations with 7 variables and
Copyright 2006 John Wiley & Sons, Ltd.

J. Appl. Econ. 21: 1103 1107 (2006)

DOI: 10.1002/jae

SOFTWARE REVIEW

1107

3120 observations with 65 variables. Some components of GRETL depend on plug-ins, a few of
which restrict the sample size. In particular, ARIMA is limited to 600 observations (again, from
Professor Cottrell). Finally, GRETLs data editor can be used on a maximum of 900 observations.
(Whatever the sample size, we recommend editing data outside GRETL and importing it. GRETLs
data management facility is just adequate.)

5. CONCLUSION
GRETL is a full-featured package. It is user-friendly for students taking an introductory econometrics course, and one that will provide most of these students all of the analytical firepower
they will require as they proceed into their careers. It operates on many platforms, is available
free of charge, and is becoming increasingly powerful.

ACKNOWLEDGEMENTS

The authors thank Allin Cottrell, James MacKinnon, and Leila J. Pratt and for helpful comments.

REFERENCES

Baiocchi G, Distaso W. 2003. GRETL: econometric software for the GNU generation. Journal of Applied
Econometrics 18: 105110.
Cottrell A. 2004. Gnu regression, econometrics and time-series library. Wake Forest University, WinstonSalem, NC. Available in PDF format at: http://gretl.sourceforge.net/ [14 June 2006].
Davidson R, MacKinnon JG. 2004. Econometric Theory and Methods. Oxford University Press: New York.
Greene WH. 2003. Econometric Analysis (5th edn). Macmillan: New York.
Gujarati D. 2002. Basic Econometrics (4th edn). McGraw-Hill: New York.
Mixon JW, Smith RJ. 2006. A Visual Guide to Using GRETL. Available at: http://csob.berry.edu/faculty/economics/gretlguide/GretlGuide.html [14 June 2006].
Racine J, Hyndman R. 2002. Using R to teach econometrics. Journal of Applied Econometrics 17: 149174.
Ramanathan R. 2002. Introductory Econometrics with Applications (5th edn). Harcourt Brace: Mason, OH.
Stock JH, Watson MW. 2003. Introduction to Econometrics. Addison-Wesley: Reading, MA.
Wooldridge JM. 2003. Introductory Econometrics: A Modern Approach (2nd edn). Thomson South-Western:
Mason, OH.

Copyright 2006 John Wiley & Sons, Ltd.

J. Appl. Econ. 21: 1103 1107 (2006)

DOI: 10.1002/jae