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University of Pennsylvania

Econ 220 / Fall 2007

Econ 220: Introduction to Econometrics

Time and Location : Section 1 : TR 9:00 - 10:20, STIT B21 Section 2 : TR 12:00 1:20, STIT B21 Instructor : Kyungchul Song, MCNB 528, 215-898-8206 Office Hours : Section 1 : M 2:00 - 3:00 Section 2 : T 10:30 11:30 TA : Harry Lee Office Hours : Sections 1 and 2 : F 9:30-11:30 Textbooks: The required textbook is Stock and Watson (2003) Introduction to Econometrics, Addison Wiley. A recommended econometrics textbook for those who have further interests are Wooldrige, J. M. (2003) Introductory Econometrics: A Modern Approach, Second Edition, South Western College Publishing. Grading: * Problem Sets [20%]: There will be approximately 10 problem sets during the semester. You can work together with your friends, but should submit your own problem set of your own typing or writing. Any two problem sets that are identical or close to identical will be given a zero score, an equivalent of no submission. Problem sets are graded by letters A, B, C. Problem sets turned in late for no valid excuses will not get a grade higher than B. The validity of excuses is judged in the same manner as for the final exam. Every Tuesday, one problem set will go out with due next Tuesday before the beginning of the class. (The exception is Problem Set 10 which will go out on Thursday) * Midterm Exam [40%]: Closed books and notes. The date is fixed to be October 11, 2007 (Thursday) for both sections. There will be no make-up exam for midterm. When a student is excused from midterm exam, his or her grade will be based on reweighting of the problem sets (40%) and the final exam (60%). * Final Exam [40%]: Closed books and notes. The date is fixed to be December 18, 2007 (Tuesday) 3:00pm-5:00pm for both sections.

Course Description This course is mainly designed to equip economics majors with basic understanding and tools that can be used for economic data analysis. The course covers the topics of probability and statistics, a variety of econometric models, and inference procedures in depth and will attempt at analyzing real data using the concepts learned in class. These empirical exercises will be distributed out in the ten problem sets. The course will follow tightly through the main chapters of the textbook. The course will begin by reviewing fundamental elements of probability and statistics. The main part of the course material is concentrated on Parts Two and Three in the text book. The course will not cover Part Four, the topics on time series data. For this course, we will use STATA for data analysis. We will have one preliminary session to prepare students for using this program. Prerequisites for this course are Econ 101, 102, and 103 (or some equivalent statistics courses that deal with probability and basic notions of statistics). Plan of the Course I. Fundamentals of Probability and Statistics (September 6 18) * The purpose of econometric analysis. * The concepts of models, and data. * The basic notions of probability: random variables, distributions, and aspects of distributions, relation between random variables (independence, uncorrelated), conditional distributions and their aspects. * The basic notions of statistics: - estimation and hypothesis testing. - large sample theory (law of large numbers the central limit theorem.) <Weekly Problem Sets 1-2 : September 11, 18> - During these weeks, we will have one addition TA session for introducing STATA program. II. OLS (September 20 October 11) Estimation and hypothesis testing both in finite samples and large samples - motivating standard OLS - Gauss-Markov theorem. - Estimation and construction of confidence intervals. - Hypothesis testing (t-test, test in large samples) Extension to multiple regressors. <Weekly Problem Sets 3-4: September 25, October 2> - We will have one TA review session before the midterm day. Midterm : October 11 (Thursday)

III. Robust Inference of LS (October 18 November 6) Heteroskedasticity Omitted variables, Errors in variables, Simultaneous Causality Sample selection Two stage least squares, Weak instruments <Weekly Problem Sets 6-8: October 23, 30, November 6> IV : Inferences about Nonlinear Models (November 8 20) The basics of MLE Binary choice models: Logit and Probit Multinomial choice models Sample selection models (Tobit models) <Weekly Problem Set 9: November 13> V : Basics of Panel Models (November 27 December 6) The nature of panel data Fixed effects regression model <Weekly Problem Set 10: November 29> - We will have one TA review session during the reading days. Final Exam : December 18 (Tuesday)