B. A. H Eco. 26 Applied Econometrics Sem. 4 2014

UNIVERSITY OF DELHI
DELHI SCHOOL OF ECONOMICS

DEPARTMENT OF ECONOMICS
Minutes of Meeting
Subject : B.A. (Hons) Economics – Sixth Semester (2014)

Course : 26 - Applied Econometrics
Date of Meeting : 10th December 2014
Venue : Department of Economics, Delhi School of Economics,
University of Delhi
Chair : Prof. Pami Dua
Attended by:
1 Lokendra Kumawat Ramjas College

2 Padma Suresh M Sri Venkateshwara College
3 Vandana Tulsyan Dyal Singh College
4 Swapan Chavraborty Shyam Lal College(E)
5 Pawan Rohilla Ramjas College
6 Simin Akhter Zakir Husain College
7 Hena Oak Miranda House
8 Neelam Singh LSR
1. It was decided that for the academic session 2014-15, the main textbook would
continue to be Basic Econometrics by Gujarati, Porter and Gunasekar(2012)
supplemented by Wooldridge(2009) for selected topics. For applications using software,
Econometrics by Example by Gujarati(2011) would be the recommended text.
2. It was also decided that in Section II.1 i.e. The Matrix Approach to Linear Regression
Model, the entire Appendix C in Gujarati and Porter(2012), 5th edition (International)
would be included in the reading list.
3. Teachers are advised to go through the following textbook for potential introduction in
the Applied Econometrics course in the BA(Hons) Semester batch of 2016-17:
Asteriou, D and Hall, Stephen G, Applied Econometrics, 2nd Edition, 2011,
Palgrave Macmillan.
In addition, it was felt that Wooldridge (2009), which is used currently as the reading for
topics III.b and V, could be used for a few other topics for the batch of 2016-17.
Teachers are advised to go through this book for the topics which are currently taught
from other books.
4. The Applied Econometrics course must orient students to do a research project and get
hands on experience with appropriate software(GRETL/ EViews/ Stata/EXCEL). This
would form part of the Internal Assessment.
The details of the Syllabus, Topic-wise Reading list, recommended text books and
Student Assessment summary are given below.
SYLLABUS
I. Stages in Empirical Econometric Research
II. The Linear Regression Model: Estimation, Specification and Diagnostic Testing
i. The Matrix Approach to Linear Regression Model: The k- variable regression
model, Assumptions of the Classical Linear Regression Model, OLS
estimation, Variance-Covariance Matrix, Coefficient of Determination R2.
ii. Review of Functional forms and Qualitative explanatory variable regression
models
iii. Regression Diagnostics
a. Detection of and remedial measures for Multicollinearity,
Autocorrelation and Heteroscedasticity.
b. Model Selection and Diagnostic Testing
1. Tests of Specification errors: Detecting the presence of unnecessary
variables, omitted variables and incorrect functional form ( Ramsey
RESET and Lagrange Multiplier Test for Adding Variables)
2. Errors of measurement: Consequences and remedial measures
3. Model Selection Criteria: R2 and Adjusted R2 criteria, Akaike’s
Information Criterion and Schwarz’s Information Criterion.
4. Additional topics in modeling (Outliers, Leverage, Influence; Recursive
least Squares; Chow’s Prediction Failure Test; Missing Data)
5. Non-normal errors and stochastic regressors
III. Advanced Topics in Regression Analysis

i. Dynamic Econometric Models
a. Distributed Lag Models: Nature of lagged phenomena, Estimation using
Koyck transformation (The Adaptive Expectations and Partial Adjustment
Models)
b. Estimation of Autoregressive Models
ii. Instrumental Variable Estimation
a. Omitted variables in a simple regression model
b. Measurement errors
IV. Panel Data Models and Estimation techniques
The Pooled OLS Regression Model, The Fixed Effect Least Squares Dummy Variable
Model, The Fixed Effect Within Group Estimator, The Random Effects Model.
V. Introduction to Econometric Software (GRETL/ EViews/ Stata/ EXCEL: ANY ONE)

i. Generation of data sets and data transformation; data analysis (Graphs and
Plots, Summary Statistics, Correlation Matrix etc.)
ii. Running an OLS regression; Testing for Linear Restrictions and Parameter
Stability
iii. Regression Diagnostics: Collinearity, Autocorrelation, Heteroscedasticity,
Normality of residuals
iv. Estimation of Other Linear Models: Weighted Least squares, Cochran-Orcutt/
Hildreth-Lu/ Prais-Winsten etc.
v. Model Selection Criteria (AIC, SIC) and Tests (Adding and Omitting Variables,
Non-Linearities: Squares, Cubes and Logs, Ramsey’s RESET test)
Topic-wise reading list
REFERENCES FROM RECOMMENDED TEXT

S.No. TOPIC BOOKS
I. Stages in Empirical Econometric Chapter 1,Introduction, Section 1.3:
Research ‘Methodology of Econometrics’ in Gujarati,
Porter and Gunasekar, Basic Econometrics,
5th ed.
II.i. The Matrix Approach to Linear Appendix-C: ‘The Matrix Approach to Linear
Regression Model Regression Model’ in Gujaratiand Porter,
Basic Econometrics, International 5th ed.
II.ii. Review of Functional forms and Chapter 2 ‘Functional Forms of Regression

Qualitative explanatory variable Models’ and Chapter 3 ‘Qualitative
regression models Explanatory Variables Regression Models in
Gujarati, Econometrics by Example.
II.iii.a Regression Diagnostics:Detection of, and Chapter 4 ‘Regression Diagnostic I:

remedial measures for Multicollinearity, Multicollinearity’,
Autocorrelation Heteroscedasticity Chapter 5 ‘Regression Diagnostic II:
Heteroscedasticity’ and
Chapter 6 ‘Regression Diagnostic III:
Autocorrelation in Gujarati, Econometrics By
Example
II.iii.b Regression Diagnostics: Model Selection Chapter 13 ‘Econometric Modeling: Model
Specification and Diagnostic Testing’,
Section13.1-13.5 and 13.9-13.12 in Gujarati,
Porter and Gunasekar, Basic Econometrics.
III.a. Advanced Topics in Regression Analysis: Chapter 17 ‘Dynamic Econometric Models:
Dynamic Econometric Models Autoregressive and Distributed-Lag Models’
in Gujarati, Porter and Gunasekar, Basic
Econometrics.(except 17.9 and 17.13)
III.b. Advanced Topics in Regression Analysis: Chapter 15 ‘Instrumental Variable
Instrumental Variable Estimation Estimation and Two Stage Least Squares’,
Section 15.1, 15.2 and 15.4 in Wooldridge,
Econometrics
IV. Panel Data Models and Estimation Chapter 16 ‘Panel Data Regression Models’
Techniques in Gujarati, Porter and Gunasekar, Basic
Econometrics
V. Introduction to Econometric Software 1. Chapter 19 ‘Carrying Out an Empirical
Project’, in Wooldridge, Econometrics.
2. Relevant Instruction Manual for Software
Recommended textbooks
1. D. N. Gujarati, D.C. Porter and Sangeetha Gunasekar, Basic Econometrics, 5th edition,
McGraw Hill, 2012 Indian edition.
2. D. N. Gujarati and D.C. Porter, Basic Econometrics, 5th edition, McGraw Hill, 2012
International edition. (This text book is required only for Topic II i. - The Matrix
Approach to Linear Regression Model. Readers can also refer to Gujarati and Sangeetha,
Basic Econometrics, 4th edition, McGraw Hill, 2009 Indian reprint. Relevant sections to
be studied are same in both text books).
3. Damodar Gujarati, Econometrics by Example, Palgrave Macmillan, 2011.
4. Jeffrey M. Wooldridge, Econometrics, Indian Edition, Cengage Learning, 2009.
Student Assessment Summary

Students will have to pass the end-semester exam and the total of the internal assessment and
end-semester exam as per university rules to clear the paper.
The end-semester final examination will be of 75 marks. The question paper will consist of
seven questions of 15 marks each from Topics I, II, III and IV only. Students will have to answer
any five questions.
The software skills of the students will be tested by the teachers during internal assessment
and not in the end-semester final exam. The paper setting committee should take a note of
this.
Internal assessment will be of 25 marks, divided further as follows:
1. Attendance: 5 marks
2. Class Test/ Assignment: 10 marks
3. Empirical project using the econometric software learnt: 10 marks. (Projects can be
done in groups of 2 or 3)

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UNIVERSITY OF DELHI

DELHI SCHOOL OF ECONOMICS

Subject : B.A. (Hons) Economics – Sixth Semester (2014)

1 Lokendra Kumawat Ramjas College

III. Advanced Topics in Regression Analysis

IV. Panel Data Models and Estimation techniques

V. Introduction to Econometric Software (GRETL/ EViews/ Stata/ EXCEL: ANY ONE)

Topic-wise reading list

REFERENCES FROM RECOMMENDED TEXT

II.ii. Review of Functional forms and Chapter 2 ‘Functional Forms of Regression

II.iii.a Regression Diagnostics:Detection of, and Chapter 4 ‘Regression Diagnostic I:

Student Assessment Summary

Internal assessment will be of 25 marks, divided further as follows:

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