George Monokroussos Department of Economics University at Albany, State University of New York BA 109B, x2-4759 gmonokroussos@albany.edu http:/www.albany.edu/~gm681884/802.

htm Office Hours: Fridays after the lectures (or by appointment).

Economics 802 Time Series Analysis Fridays 12:10PM-01:30PM, BA 214, and 01:40PM-03:15PM, BA 213

Course Description: This course is intended for 2nd year and advanced PhD students who are interested in time series econometrics, and/or applied macroeconomics. It provides an introduction to the econometric techniques needed for inference and forecasting using time series data, primarily in macroeconomics, but also in finance. Its focus is on both the theoretical foundations and the applications of the various topics covered. Note: This syllabus is a working document and is subject to change. Updated versions will be posted in the Blackboard page for the course.

Required Text:

James D. Hamilton, Time Series Analysis, Princeton University Press, 1994 (also available at the university bookstore).
Other recommended books: Additional books that you may find useful are listed below (in no particular order): Granger, C.W.J., Newbold, P.: Forecasting Economic Time Series, Academic Press (2nd edition, 1986). Enders, Walter: Applied Econometric Time Series, Wiley, 2009. Hayashi, Fumio, Econometrics, Princeton University Press, 2001. Ltkepohl, Helmut, New Introduction to Multiple Time Series Analysis, Springer (2010). White, Halbert, Asymptotic Theory for Econometricians, Academic Press 2000 (Revised Edition). Amemiya, Takeshi, Advanced Econometrics, Harvard University Press 1985. Harvey, Andrew, Time Series Models, MIT Press (2nd edition, 1993).

Harvey, Andrew, Forecasting, Structural Time Series Models and the Kalman Filter, Cambridge University Press 1991. Clements, Michael, and David Hendry, Forecasting Economic Time Series, Cambridge University Press 1998. Durbin, James, and Siem Jan Koopman, Time Series Analysis by State Space Methods (Oxford Statistical Science Series), Oxford University Press 2001. Kim, Chang-Jin, and Charles R. Nelson, State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications. MIT Press 1999. Additionally, I will be referring throughout the semester to papers related to techniques and models covered in class

Grading: There will be two in-class exams: a midterm (worth 35% of the grade) and a final, (worth 40% of the grade). There will also be problem sets (worth the remaining 25% of the grade).

Course Outline: (The list below will be getting updated with references as the semester progresses). Note: * Denotes required readings.

Topic 0: Difference equations and Lag Operators. * Hamilton Chapters 1, 2 and Appendix A. Sargent, Thomas J. (1987): Macroeconomic Theory, 2nd edition, Academic Press (Boston).

Topic 1: Univariate Stationary Time Series. * Hamilton Chapter 3. Granger, C.W.J., Newbold, P.: Forecasting Economic Time Series, Academic Press (2nd edition, 1986).

Topic 2: Estimation, Hypothesis Testing, Forecasting. * Hamilton Chapters 4, 5. Amemiya, Takeshi, Advanced Econometrics, Harvard University Press 1985, Chapter 4.

Clements, Michael P. and David F. Hendry (1998) Forecasting Economic Time Series, Cambridge: Cambridge University Press. * Diebold, F. X. and R. S. Mariano (1995) Comparing Predictive Accuracy, Journal of Business and Economic Statistics, 13, 253-263. Giacomini, R. and H. White (2004) Tests of Conditional Predictive Ability, Econometrica, 74, 1545-1578. Granger, C.W.J., Newbold, P.: Forecasting Economic Time Series, Academic Press (2nd edition, 1986). West, K. D. (1996) Asymptotic Inference about Predictive Ability, Econometrica, 64, 10671084. * West, K. D. (2006) Forecast Evaluation, 100-134 in Handbook of Economic Forecasting, Vol. 1, G. Elliott, C. Granger and A. Timmerman (eds), Amsterdam: Elsevier (2006). Inoue, A., Kilian, L. (2005). In-sample or out-of-sample tests of predictability: Which one should we use? Econometric Reviews, 23(4), 371-402.

Topic 3: Spectral Analysis Theory and Applications. * Hamilton Chapter 6. Granger, C.W.J., Newbold, P.: Forecasting Economic Time Series, Academic Press (2nd edition, 1986). Cogley, T., and J.M Nason (1995): Effects of the Hodrick-Prescott filter on trend and difference stationary time series: Implications for business cycle research, Journal of Economic Dynamics and Control, 19, 253-278. Newey, W., and K. West (1987): A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix, Econometrica, 55, 703-708.

Topic 4: Unit Roots and Time Trends. * Hamilton Chapters 15, 16, 17. Hamilton Chapters 7,8 (review material). Enders, Walter: Applied Econometric Time Series, Wiley, 2009. Andrews, Donald W.K. (1993), "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica 61, 821-856. Elliott, Graham, and Ulrich Muller (2006), Efficient Tests for General Persistent Time Variation in Regression Coefficients, Review of Economic Studies 73 (2006), 907 940.

Stock, James (1994), Unit Roots, Structural Breaks, and Trends, Handbook of Econometrics, (edited by R. Engle and D. McFadden), vol. 4, 2740-2841, North Holland, New York. Dickey, D. and W. Fuller (1979): Distribution of the Estimators for Autoregressive Time Series with a Unit Root, Journal of the American Statistical Association, 74, 427-431. Elliott, G., T. Rothenberg, and J. Stock (1996): Efficient Tests for an Autoregressive Unit Root, Econometrica, 64, 813-836. Phillips, P.C.B. (1987): Time Series Regression with a Unit Root, Econometrica 55, 277-301. Phillips, P.C.B. and Pierre Perron (1988): Testing for a Unit Root in Time Series Regression, Biometrika 75, 335-46. Sims, Christopher A., and Harald Uhlig (1991): Understanding Unit Rooters: A Helicopter Tour, Econometrica 59, 1591-99. * Sims, Christopher A., J. Stock, and M. Watson (1990): Inference in Linear Time Series Models with Some Unit Roots, Econometrica 58, 113-144.

Topic 5: Covariance Stationary Vector Time Series. * Hamilton Chapters 10, 11 Enders, Walter: Applied Econometric Time Series, Wiley, 2009. * Sims, C. (1980): Macroeconomics and Reality, Econometrica, 48, 1-48. * Granger, C.W.J. (1969): Investigating Causal Relations by Econometric Models and CrossSpectral Methods, Econometrica 37: 424-38. Ltkepohl, Helmut, New Introduction to Multiple Time Series Analysis, Springer (2010).

Topic 6: Cointegration. * Hamilton Chapters 18, 19, 20 Enders, Walter: Applied Econometric Time Series, Wiley, 2009. Ltkepohl, Helmut, New Introduction to Multiple Time Series Analysis, Springer (2010). * Engle, R., and C.W.J. Granger (1987): Co-Integration and Error Correction: Representation, Estimation, and Testing, Econometrica, 55, 251-276. * Johansen, S. (1988): Statistical Analysis of Cointegration Vectors, Journal of Economic Dynamics and Control, 12, 231-254.

* Granger, C.W.J., and P. Newbold (1974): Spurious Regressions in Econometrics, Journal of Econometrics, 2, 111-120. Stock, J. and M. Watson (1988): Testing for Common Trends, Journal of the American Statistical Association, 83, 1097-1107.

Further topics (time permitting):

Topic 7: Time Series Models for Higher Moments. Hamilton Chapter 21. Enders, Walter: Applied Econometric Time Series, Wiley, 2009.

Topic 8: State Space Models and the Kalman Filter. Hamilton Chapter 13. Kim, Chang-Jin, and Charles R. Nelson, State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications. MIT Press 1999.

Topic 9: Nonlinear Univariate Models. Hamilton Chapter 22. Enders, Walter: Applied Econometric Time Series, Wiley, 2009.