Posted: February 11th, 2015

Econometric Project

Paper, Order, or Assignment Requirements

 

 

The data set must contain a minimum of 3 variables, (one dependent
variable and at least 2 right hand side variables to be added to a constant
term). You should concentrate on estimating a multiple (rather than simple)
regression model.
You should have a minimum of 50 observations in your regressions.
Anything less will be penalised heavily.
The model should be a causal one, (ie the right hand side variables should
explain the dependent variable, not the other way round). This also means, for
example, that you should not estimate identities like a national accounts
model of the form Y=C+I+G+(X-M). This is an accounting identity and so the
coefficients shouldn’t be anything other than one, barring measurement error).
The econometric results should include a thorough statistical evaluation using
the full range of (relevant) diagnostic tests highlighted during the course. Do
not use tests just for the sake of it. There are no marks to be gained by doing
countless irrelevant tests. Only use tests that are relevant to the type of data
and economic relationship you are trying to estimate. (For the purposes of the
project assume that a sample of 50 or more observations is enough to make
any asymptotic tests valid).

QM2 Econometric Project

As part of the course requirements you have to undertake an econometric

evaluation of an economic issue using data that you have gathered either

from the host of data sets now available on the web, or that you have

assembled yourself from data published in journals or in official sources.

The project is worth 20% of the total marks for this course

The data set must contain a minimum of 3 variables, (one dependent

variable and at least 2 right hand side variables to be added to a constant

term). You should concentrate on estimating a multiple (rather than simple)

regression model.

You should have a minimum of 50 observations in your regressions.

Anything less will be penalised heavily.

The model should be a causal one, (ie the right hand side variables should

explain the dependent variable, not the other way round). This also means, for

example, that you should not estimate identities like a national accounts

model of the form Y=C+I+G+(X-M). This is an accounting identity and so the

coefficients shouldn’t be anything other than one, barring measurement error).

The econometric results should include a thorough statistical evaluation using

the full range of (relevant) diagnostic tests highlighted during the course. Do

not use tests just for the sake of it. There are no marks to be gained by doing

countless irrelevant tests. Only use tests that are relevant to the type of data

and economic relationship you are trying to estimate. (For the purposes of the

project assume that a sample of 50 or more observations is enough to make

any asymptotic tests valid).

This project should be completed and handed in (via Turnitin) by Midday

Wednesday 4th February 2015

In order for the project to be marked at all, you must also provide a disk or

USB containing i) the data you have used ii) the Stata output log containing

your regression output (any output – including graphs – generated using any

other package will be penalised) and iii) a copy of the project

Do NOT use a package other than Stata top do the project. This can often

cause confusion that this is your own work. Nor is it necessary. The project is

a demonstration that you understand and can implement the (relevant)

techniques/tests covered in the course. This includes mastering and

understanding relevant Stata commands.

Do NOT write your name on the project – just give your student number

You should aim for a maximum of 2,500 words or around 8 pages of text, 2

to 3 tables of results and 2 or 3 figures (not including the log file)Please

provide a word count on your cover page.Project Objectives

The idea is to choose an economic issue which you find interesting, outline a

theory and a set of testable hypotheses that follow on from that. Then test the

theory empirically using the tools you have learned during this term’s course.

The dissertation should read something like a typical article that you would

find in a (non-technical) academic journal like the Journal of Economic

Perspectives or the May Papers & Proceedings volumes of the American

Economic Review, (the collection of back issues are in the library).

Choosing a Topic

The most important thing is to choose a project that is feasible, that can be

finished within one month from start to finish and still allow you time to work

on your other subjects. This means confining your topic to a simple issue.

Also it is a good idea to choose a topic that you are interested in, rather than

one you fell you ought to do. The more you are interested the easier the

project will be. Do not write the theoretical part of your project until you know

you have data that can be used to test your hypotheses.

One good way to find a topic to study is to read the economic pages of the

broadsheet newspapers and/or academic articles summarised in overview

journals like the

Journal of Economic Perspectives

or

Journal of Economic Literature

both of which are in the library. In addition there are specialist journals, (and

therefore more technical), such as the

American Economic Review, Economic Journal, Quarterly Journal of

Economics, Journal of Labor Economics, Journal of Industrial

Economics, Journal of Development Economics, Journal of Finance

which should all be good sources of current issues concerning academic

economists

Data

There are a large variety of data sources on the internet that should meet your

needs

Many UK macroeconomic statistics, (inflation, unemployment, gdp etc), can

be downloaded from the Office for National Statistics website

http://www.ons.gov.uk/ons/index.html

UK Regional data can be found here

http://www.nomisweb.co.ukThe bized site also contains access to official UK data alongside company

account data and some international data.

http://www.bized.co.uk/learn/economics/index.htm

You can find stock market data at the Stock Exchange’s web site

http://www.londonstockexchange.com/

or from yahoo http://uk.finance.yahoo.com/q/hp?s=%5EFTSE

or from the Bank of England

http://www.bankofengland.co.uk/statistics/pages/default.aspx

A very good source of international data both cross section and time series is

given at the Resources for Economists website

http://rfe.org/showCat.php?cat_id=2

and also the Statlib website http://lib.stat.cmu.edu

The World Bank also has data http://worldbank.org

and there are lots of data and ideas at

http://www.economagic.com/ and http://pwt.econ.upenn.edu

The library also has a useful link to some sites

For those of you interested in working with cross section data. I have put 2

different UK cross section data sets on the course web site

Health, Wages: GHS_project.dta – which has information on wages, health,

smoking, drinking, education and other socio-demographic characteristics of

individuals taken from the General Household Survey

(you can find a codebook giving details of the variables at

http://www.esds.ac.uk/findingData/snDescription.asp?sn=5804

Consumption: Food_project.dta – which has information on household

spending on various consumer items taken from the Expenditure & Food

Survey

(you can find a codebook giving details of the variables at

http://www.esds.ac.uk/findingData/snDescription.asp?sn=5375

You will have to choose which variables to model to make sure the data are

free of missing values and give economic reasons for your choice.

These are just guides to help you. You may, of course, find your own data.Analysis

Ideally your project should look and be structured like an article you can find

in any of the economic journals listed above. You are strongly advised to read

some articles to get a feel for how they are presented.

(there is an example article on the course moodle page)

So your project should include the following sections:

Theoretical Framework

Set out the economic theory underlying your project and use it to specify a

model and the resulting hypotheses to be tested. Set out your prior

expectations of the likely signs and magnitudes of the coefficients. Discuss

any econometric problems you expect to encounter.

Data

Discuss the sources for your data. Give the exact definition of variables (in a

Table in an appendix) and sample period, Describe the main features of the

data using a table of sample means and their standard errors. Graph the

trends in the dependent and, perhaps, the independent variables. Comment

on the main trends/features.

Econometric Method

Outline the econometric techniques used to estimate your model, (eg.

ordinary least squares with corrections for heteroskedasticty/autocorrelation).

You need to convince the reader that you have made the right choice of

estimation technique. Evaluate the model using the set of (relevant)

diagnostic tests covered in the lectures. (Eg, Box-Cox, Ramsey Reset,

Forecasting). Do NOT report the results of the tests one after another like a

shopping list. Report the tests for each model at the bottom of a column of

estimates. (Again read a journal article for hints on presentation).

Results

Outline your results in tabular form, (check with a journal if you are unsure as

to how to present your results). The Stata command “outreg” will help

considerably with you inputting the results in tabular form. State whether your

hypotheses are accepted or rejected. Comment on the results and on any

diagnostic tests you have used.

Conclusion

Give an overview of your hypotheses and main results

References

Always list the data sources and articles that you may have read at the end of

the discussion. Tables and Figures should come after the references.