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University of Pennsylvania

Economics 705, Fall 2011

Econometrics I - Fundamentals
Instructors: Frank Schorfheide; Room 525, McNeil Building E-mail: schorf@ssc.upenn.edu URL: http://www.econ.upenn.edu/schorf Oce Hours: TBA

Xu Cheng; Room 527, McNeil Building E-mail: xucheng@sas.upenn.edu URL: http://www.sas.upenn.edu/xucheng Oce Hours: TBA Teaching Assistants: ** Email: ** Oce Hours:** ** Email: ** Oce Hours: ** Scheduled Class Time and Organization: Class will meet twice a week Tuesdays and Thursdays from 1:30-3:00 for lectures in Room **, McNeil. The teaching assistants will conduct a one hour discussion and review session once a week. Details will be announced. Course Description: This is the rst econometrics course in the rst-year Econ Ph.D. sequence at Penn. The course covers selected topics in mathematical statistics, least squares estimation, large sample analysis of least squares and related estimators, endogeneity, generalized methods of moments (GMM), maximum likelihood estimation of linear and nonlinear models, analysis of panel data models, as well as re-sampling techniques.

Frank Schorfheide: Economics 705, Fall 2011 Prerequisites: Calculus, Linear Algebra, Probability and Statistics

Course Web Page: Course documents and information are available via blackboard: http://courseweb.library.upenn.edu. Course Requirements: Problem Sets: There will be 8 problem sets, assigned during the semester (4 for each part). The problem sets are designed to give the students the opportunity to review and enhance the material learned in class. Students are encouraged to form small study groups, however, each student has to submit his or her own write-up of the solution. These solutions must be submitted on the specied due dates. [20%] Midterm Exam: Tuesday, Oct 25. [40%] Final Exam: Monday, Dec 19, 12:00-2:00p [40%]

Course text:

Hayashi, Fumio (2000): Econometrics, Princeton University Press, ISBN 0-69101018-8, HB139.H39 2000. (required) Casella, George and Roger Berger (2001): Statistical Inference, Duxbury Press, ISBN: 9780534243128 (reference)

Econometrics Software: The problem sets will involve computer-based exercises in which the econometric techniques introduced in the lectures will be applied. The recommended software for this course is R. It is available free of charge at: http://www.r-project.org/.

Frank Schorfheide: Economics 705, Fall 2011

Econometrics I Course Outline Part I 1


Probability Probability Modeling and Random Variables PDF, CDF, Transformations of Random Variables, Expectation, Moment Generating Function Joint Distribution, Conditional Distribution, Marginal Distribution

Least Squares Estimation and Inference Least Squares Estimation and Projections Basics of Inference: Point Estimation, Testing, and Condence Interval Small Sample Inference: Mean and Variance of Least Squares Estimator and Eciency

Large Sample Properties Convergence in Probability, Convergence in Distribution, and Rules Large Sample Analysis of Regression Model, Heteroskedasticity and Estimation of Covariance Matrix Maximum Likelihood Estimation (MLE), Likelihood Function, Eciency, QuasiMLE Wald, Lagrangian Multiplier (LM), and Likelihood Ratio (LR) Tests

Endogeneity Endogeneity and Two Stage Least Squares Estimation

Frank Schorfheide: Economics 705, Fall 2011

Part II 5
Generalized Method of Moments (GMM) Estimation Linear and Nonlinear Models with Endogeneity, Moment Conditions and GMM Criterion Function Consistency and Asymptotic Normality of GMM Estimator, Weight Matrix and Ecient GMM Estimator Specication Test Weak IV

MLE of Nonlinear Models Consistency and Asymptotic Normality (as an Extremum Estimator) Hypothesis Testing with Nonlinear Constraints Application: Binary Choice Model, Censored Regression Model, Truncated Regression Models

Panel Data Model Fixed Eects, Random Eects, Specication Test

Bootstrap Implementation and Justication