Business School

School of Economics

ECON6003
Econometric Analysis

Course Outline
Semester 1, 2017

Part A: Course-Specific Information

Students are also expected to have read and be familiar with Part B
Supplement to All Course Outlines. This contains Policies on Student
Responsibilities and Support, Including Special Consideration, Academic
Misconduct and Plagiarism, and Key Dates. It also contains the BUSINESS
SCHOOL PROGRAM LEARNING GOALS.

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 Table of Contents
1 STAFF CONTACT DETAILS 1
1.1 Communications with staff 1
2 COURSE DETAILS 1
2.1 Teaching Times and Locations 1
2.2 Units of Credit 1
2.3 Summary of Course 1
2.4 Aims and Relationship to Other Courses 2
2.5 Student Learning Outcomes 2
3 LEARNING AND TEACHING ACTIVITIES 3
3.1 Approach to Learning and Teaching in the Course 3
3.2 Learning Activities and Teaching Strategies 4
4 ASSESSMENT 5
4.1 Formal Requirements 5
4.2 Assessment Details 5
4.3 Problem Sets 5
4.3.1 Submission Procedure for Problem Sets 5
4.4 Individual Presentation Error! Bookmark not defined.
4.5 Final Exam Format 6
4.6 Quality Assurance 6
5 COURSE EVALUATION AND DEVELOPMENT 7
6 COURSE RESOURCES 7
6.1 Course website 7
6.2 Textbook and readings 7
6.3 Computing work 7
7 COURSE SCHEDULE 8

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 1 STAFF CONTACT DETAILS

Dr Seojeong (Jay) Lee

Room: Quad 3121
Phone: 9385 3325
Email: jay.lee@unsw.edu.au
Consultation Times: 3-4pm on Wednesdays or by appointment

Tutor: Jingrui Xu
Email: jingrui.xu@unsw.edu.au
Consultation Times: by appointment

1.1 Communications with staff

The lecturer-in-charge is responsible for the course content as well as the overall
administration of the course. You should feel free to approach me during consultation
times about any academic matter related to the course.

You are encouraged to ask questions during lectures when time permits and especially
during tutorials. Given the relatively small size number of students, you and fellow
classmates will benefit from questions and subsequent discussions during the
lectures/tutorials.

You must not expect a review of the lecture material during consultation hours. I will not
go over tutorial problems that have been discussed in tutorials. You should prepare
specific questions and discuss the specific issues and concerns you have encountered
in understanding the course material.

Discussion of course subject material will not be entered into via lengthy emails.

Email correspondence on administrative matters will be responded to within 48 hours,

but not over weekends.

2 COURSE DETAILS

2.1 Teaching Times and Locations

Lectures start in Week 1 to Week 12 inclusively. There is one 2-hour lecture and one
1-hour tutorial class per week.

Lecture Time: Wednesdays 18:00 - 21:00

Location: UNSW Business School 232

2.2 Units of Credit

The course is worth 6 units of credit.

2.3 Summary of Course

This course is designed to provide students a rigorous foundation of modern
econometrics for applied research in economics, as a unified theme of analyzing
economic models and data using mathematical statistics. The first part of the course
covers classic econometric concepts and techniques, such as moment estimation,
conditional expectation and projection, maximum likelihood, least squares regression,

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 and hypothesis testing and inference, in a rigorous way. Although unnecessary
technicalities will be avoided, some statistical theory such as the law of large numbers
and the central limit theorem as well as basic matrix algebra will be taught. The second
part of the course builds on these sound fundamentals of econometric theory. It will
cover IV and 2SLS estimators, GMM, and the bootstrap. Additional topics such as time
series and panel data may be covered briefly. Finally, students will be required to use
statistical packages, e.g. Stata or MATLAB, to conduct econometric analysis with data.

2.4 Aims and Relationship to Other Courses

This course is a graduate level (for PhD and MEc students) econometrics course. It
aims to give an equivalent treatment of advanced econometrics with similar courses in
other top research universities worldwide.

2.5 Student Learning Outcomes

The Course Learning Outcomes are what you should be able to DO by the end of this
course if you participate fully in learning activities and successfully complete the
assessment items.

The Learning Outcomes in this course also help you to achieve some of the overall
Program Learning Goals and Outcomes for all undergraduate coursework students in
the Business School. Program Learning Goals are what we want you to BE or HAVE
by the time you successfully complete your degree. You demonstrate this by achieving
specific Program Learning Outcomes - what you are able to DO by the end of your
degree.

For more information on the Undergraduate Program Learning Goals and Outcomes,
see Part B of the course outline.

The following table shows how your Course Learning Outcomes relate to the overall
Program Learning Goals and Outcomes, and indicates where these are assessed:

Program Learning Course Learning Outcomes Course Assessment

Goals and Outcomes Item
This course helps you to On successful completion of the course, This learning outcome
achieve the following you should be able to: will be assessed in the
learning goals following items:

1 Knowledge • Use matrix algebra to formulate • Problem Sets

econometric problems. • Exam

• Apply statistical software to real

economic data and interpret the
results.

• Have a thorough understanding of

recent developments in econometrics
such as generalized method of
moments as well as classic
econometric techniques such as
maximum likelihood and least
squares.
2 Critical thinking • Evaluate critically any piece of • Problem Sets
and problem empirical research. • Exam
solving
• Understand the implications of model
assumptions on the estimation and

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 inference.
3a Written • Construct written work which is • Problem Sets
communication logically and professionally • Exam
presented.
3b Oral • Communicate ideas in a succinct and • Problem Sets
communication clear manner. • Individual
Presentation

4 Teamwork • Work collaboratively to complete a • Problem Sets

task.
5a. Ethical, • Not specifically addressed in this
environmental course.
and
sustainability
considerations
5b. Social and • Not specifically addressed in this
cultural course.
awareness

3 LEARNING AND TEACHING ACTIVITIES

3.1 Approach to Learning and Teaching in the Course

The philosophy underpinning this course and its Teaching and Learning Strategies (3.3
below) are based on “Guidelines on Learning that Inform Teaching at UNSW”. These
guidelines may be viewed at: www.guidelinesonlearning.unsw.edu.au.

Quantitative information and statistics are pervasive not only in the study of economics
and business but in understanding a wide range of phenomena. Every attempt will be
made to demonstrate the relevance of the course to understanding such phenomena.
This will require applying econometric and statistical methods and techniques to
practical problems in a broad set of topics.

Students who are undertaking this course will have some background in basic statistics
and grounding in the principles of regression analysis. Using this knowledge as a base,
an extensive discussion of the use of regression theory and some of its extensions will
be provided. We demonstrate how regression models can be applied to data to estimate
relationships, to forecast and to test hypotheses that arise in economics and business.
We also discuss common problems that arise in most economic data.

General principles or guidelines for undertaking applied work are discussed. In

particular, we stress careful data analysis, the need to evaluate estimated models and
the importance of the links between econometric models and the underlying substantive
knowledge or theory associated with the particular application. These issues will be
related to applications drawn from various fields.

It is essential that the discussion of how to use econometric tools effectively be

complemented with practice in analysing data. An important aid in this particular task
will be the computing component where the popular econometrics package STATA or
MATLAB will be used.

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 3.2 Learning Activities and Teaching Strategies
The examinable content of the course is defined by the references given in the Lecture
Schedule, the content of Lectures, the content of the Tutorial Program, and the
assigned readings.

Lectures
The purpose of Lectures is to provide a logical structure for the topics that make up the
course; to emphasize the important concepts and methods of each topic, and to
provide relevant examples to which the concepts and methods are applied.

Tutorials
In this course, problem sets replace tutorials. The object of the problem sets is to
practice various approaches to, and issues associated with the assigned exercises and
topics covered in the course.

Out-of-Class Study
While students may have preferred individual learning strategies, it is important to note
that most learning will be achieved outside of class time. Lectures can only provide a
structure to assist your study, and tutorial time is limited.

Discussion Forum
A Discussion Forum will operate on the Course website. Tutors will monitor the
discussion and answer questions when needed.

Learning strategies
While students may have preferred individual learning strategies, it is important to note
that most learning will be achieved outside of class time. Lectures can only provide a
structure to assist your study, and tutorial time is limited.

An ‘ideal’ learning strategy (on which provision of the course materials is based) might
include:
• Prior to attending a lecture, read the assigned readings for the lecture. Also
download and read the lecture notes for your lecture and bring them with you to
the lecture. The lecture notes are available for downloading on the course website.
• Attend the lecture. The lecture notes form the basis for the lecture. Key concepts
will be emphasised and demonstrated through worked examples.
• Complement your lecture notes with the assigned readings and ask questions
from the lecturer if some issues are still unclear.
• Attempt the assigned problem set questions for that week. Do not be discouraged
if you cannot answer all of the questions as some questions are more difficult than
others. Attempting the assigned problem set questions will provide a self-test of
your understanding of particular topics and identify those topics that may require
further attention.

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 4 ASSESSMENT

4.1 Formal Requirements

To be eligible for a passing grade in this course, students must achieve a composite
mark of at least 50 out of 100.

4.2 Assessment Details

Assessment Task Weighting Length Due Date

1 Problem Sets 20% Week 3,6,9,12
2 Midterm Exam 30% 1 hour Week 7
3 Final Exam 50% 2 hours University exam period

4.3 Problem Sets

A problem set will be distributed approximately every two weeks. In order to review your
progress, written answers for problem set questions will be collected in Week 3,5,8, and
12. Each problem set is worth 5%.

The problem sets will be marked and handed back as promptly as possible. Written
answers must be neatly presented. Pages must be stapled and the student name and
number must be indicated. More details on the problem sets will be provided in class
and on the website. You are allowed to work with other students in the class, but
you must write up your own solutions.

The purpose of the problem sets is to test knowledge and understanding of econometric
concepts, methodology and interpretation of results and the ability to apply econometric
reasoning in solving a realistic problem. It will also provide a self-test of how you are
doing in the course.

Problem sets along with the midterm exam provide important feedback mechanism for
the lecturer on any major issues faced by the students. These will then be addressed in
lectures/tutorials.

4.3.1 Submission Procedure for Problem Sets

You must submit one hard copy of your own solutions to the problem set to the lecturer
at the start of the lecture of the week the assignment is due.

If you fail to submit your own solutions you will be given a mark of zero.

4.4 Midterm Exam Format

A one-hour midterm examination will be held in Week 7 in class. The details of the
midterm exam will be discussed in the lectures.

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 4.5 Final Exam Format

A two-hour final examination will be held during the University’s final examination
period. Examples of previous exam questions will be provided and the format of the
exam will be discussed in the lectures.

The purpose of the final examination is to assess knowledge of econometric concepts,

methodology and interpretation of results relating to the models reviewed in class. It is
designed to test your learning and understanding of both the theoretical and empirical
aspects of different econometric techniques discussed. As outlined in 3.2 above all
material covered in the lectures and tutorial program is examinable.

Applications for special consideration for the final exam must be lodged online through
myUNSW within 3 working days of the assessment (Log into myUNSW and go to My
Student Profile tab > My Student Services channel > Online Services > Special
Consideration). Then submit the originals or certified copies of your completed
Professional Authority form (pdf - download here) and any supporting documentation to
Student Central.

4.6 Quality Assurance

The Business School is actively monitoring student learning and quality of the student
experience in all its programs. A random selection of completed assessment tasks may
be used for quality assurance, such as to determine the extent to which program
learning goals are being achieved. The information is required for accreditation
purposes, and aggregated findings will be used to inform changes aimed at improving
the quality of Business School programs. All material used for such processes will be
treated as confidential and will not be related to course grades.

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 5 COURSE EVALUATION AND DEVELOPMENT

Each year feedback is sought from students and other stakeholders about the courses
offered in the School and continual improvements are made based on this feedback.
UNSW's myExperience Survey Tool is one of the ways in which student evaluative
feedback is gathered. You are strongly encouraged to take part in the feedback
process.

6 COURSE RESOURCES

6.1 Course website

The website for this course is on UNSW Moodle at: http://moodle.telt.unsw.edu.au

The website contains: (a) the course outline, the tutorial documents and other course
handouts; (b) the lecture notes; (c) data used in the tutorial problems and project; (d)
past exam papers; and (e) course announcements.

Students should consult this website at least once a week as it contains important
information about the course. It will be assumed that all students have seen any notice
posted on the course website.

6.2 Textbook and readings

Required Text Books:
• Hansen, B.E. (2017): Econometrics, manuscript, University of Wisconsin-
Madison (downloadable for free):
http://www.ssc.wisc.edu/~bhansen/econometrics/

Substitutes/compliment textbooks:
The content and methodology of following books can be used as substitutes to the
main reference book:
• Angrist, J. D. and Pischke, J-S (2009): Mostly Harmless Econometrics- An
Empiricist’s Companion. Princeton University Press.
• Wooldridge, J. M. (2013): Introductory Econometrics: A Modern Approach, 5th
ed. South-Western.
• Casella, G. and R. L. Berger (2002): Statistical Inference, 2th ed. Duxbury.
• Greene, W. (2007): Econometric Analysis, 6th ed. Prentice Hall.
• Hayashi, F. (2000): Econometrics, Princeton University Press.

6.3 Computing work

Computing is an integral component of Econometric analysis. In this course we will use
MATLAB to perform empirical analysis using datasets to address specific economic
questions and to conduct Monte Carlo simulations to illustrate finite-sample or large-
sample behaviour of various estimators. You may use other statistical software such as
Stata. Both MATLAB and Stata are available for use on the Business School labs.

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 7 COURSE SCHEDULE
Lectures start in Week 1 and finish in Week 12. The schedule is approximate and
subject to change. Changes will be announced in class, if any.

LECTURE SCHEDULE
Week Topic Reference

Week 1 Introduction, Review of Matrix Algebra and Hansen Ch.1,

1 March Probability theory Appendix A, B
Week 2
Conditional Expectations and Projection Hansen Ch.2
8 March
Week 3 The Algebra of Least Squares
Hansen Ch.3
15 March PS 1 Due
Week 4
Least Squares Regression Hansen Ch.4
22 March
Week 5
Normal Regression and Maximum Likelihood Hansen Ch.5
29 March
Week 6 Asymptotic Theory for Least Squares
Hansen Ch.6-7
5 April PS2 Due
Week 7 Asymptotic Theory for Least Squares (cont.)
Hansen Ch.6-7
12 April Midterm Exam

Mid-semester break: Friday 14 – Saturday 23 April inclusive

Week 8
Hypothesis Testing and Confidence Interval Hansen Ch.9
26 April
Week 9 The Bootstrap
Hansen Ch.13
3 May PS 3 Due
Week 10 Instrumental Variables (IV) and Two-Stage
Hansen Ch.10
10 May Least Squares (2SLS)
Week 11
Further Topics on IV Hansen Ch.10
17 May
Week 12 Generalized Method of Moments (GMM)
Hansen Ch. 11
24 May PS 4 Due
Week 13
NO LECTURES
31 May

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