Wednesday, December 17, 2014

End-of-Semester Econometrics Examination

My introductory graduate econometrics class has just finished up. The students sat the final examination yesterday. They did really well!

If you'd like to try your hand, you can find the exam. here.

© 2014, David E. Giles

Sunday, December 14, 2014

The Rotterdam Model

Ken Clements (U. Western Australia) has sent me a copy of his paper, co-authored with Grace Gao this month, "The Rotterdam Demand Model Half a Century On". 

How appropriate it is to see this important landmark in econometrics honoured in this way. And how fitting that this paper is written by two Australian econometricians, given the enormous contributions to empirical demand analysis that have come from that group of researchers - including Ken and his many students - over the years. (But more on this another time.)

Any student who wants to see applied econometrics at its best can do no better than look at the rich empirical literature on consumer demand. That literature will take you beyond the "toy" models that you meet in your micro. courses, to really serious ones: the Linear Expenditure System, the Rotterdam Model, the Almost Ideal Demand System, and others. Where better to see the marriage of sound economic modelling, interesting data, and innovative statistical methods? In short - "econometrics".

Back to Ken and Grace's paper, though. Here's the abstract:

Saturday, December 13, 2014

When Did You Last Check Your Code?

Chris Blattman (Columbua U.) has a blog directed towards international development, economics, politics, and policy.

In a post yesterday, Chris asks: "What happens when a very good political science journal checks the statistical code of its submissions?"

The answer is not pretty!

His post relates to the practice of the Quarterly Journal of Political Science to subject empirical papers to in-house replication. This involves running the code provided by authors. He cites a batch of 24 such papers in which only 4 were found to be error-free.

Have you checked you own code recently?

© 2014, David E. Giles

Friday, December 12, 2014

"The Error Term in the History of Time Series Econometrics"

While we're on the subject of the history of econometrics ......... blog-reader Mark Leeds kindly drew my attention to this interesting paper published by Duo Qin and Christopher Gilbert in Econometric Theory in 2001.

I don't recall reading this paper before - my loss.

Mark supplied me with a pre-publication version of the paper, which you can download here if you don't have access to Econometric Theory.

Here's the abstract:
"We argue that many methodological confusions in time-series econometrics may be seen as arising out of ambivalence or confusion about the error terms. Relationships between macroeconomic time series are inexact and, inevitably, the early econometricians found that any estimated relationship would only fit with errors. Slutsky interpreted these errors as shocks that constitute the motive force behind business cycles. Frisch tried to dissect further the errors into two parts: stimuli, which are analogous to shocks, and nuisance aberrations. However, he failed to provide a statistical framework to make this distinction operational. Haavelmo, and subsequent researchers at the Cowles Commission, saw errors in equations as providing the statistical foundations for econometric models, and required that they conform to a priori distributional assumptions specified in structural models of the general equilibrium type, later known as simultaneous-equations models (SEM). Since theoretical models were at that time mostly static, the structural modelling strategy relegated the dynamics in time-series data frequently to nuisance, atheoretical complications. Revival of the shock interpretation in theoretical models came about through the rational expectations movement and development of the VAR (Vector AutoRegression) modelling approach. The so-called LSE (London School of Economics) dynamic specification approach decomposes the dynamics of modelled variable into three parts: short-run shocks, disequilibrium shocks and innovative residuals, with only the first two of these sustaining an economic interpretation."

© 2014, David E. Giles

More on the History of Econometrics From Olav Bjerkholt

If you look back at the various posts on this blog in the category of History of Econometrics, you'll find that I've often mentioned papers written by Olav Bjerkholt, of the University of Oslo.

Olav has drawn my attention to two more recent papers of his. They're titled, "Econometric Society 1930: How it Got Founded", and "Glimpses of Henry Schultz in Mussolini's Italy 1934". The second of these is co-authored with Daniela Parisi.

Here's the abstract from the first paper:
"The Econometric Society was founded at an “organization meeting” in December 1930. The invitations had been issued by Irving Fisher, Ragnar Frisch and, Charles F. Roos. In June the same year they had sent a form letter to a list of 31 scholars to solicit advice about establishing an international association “to help in gradually converting economics into a genuine and recognized science.” The responses of these scholars from ten different countries are set out at some length in the paper. Rather than persevering in building a constituency of adherents on which a society could be founded the three initiators decided to rush ahead and sent out invitations to an organization meeting to found the Econometric Society at short notice. The paper discusses possible reasons for the change of pace, indicating that Schumpeter had a decisive role, and gives an account of the deliberations of the organization meeting founding the Econometric Society."

The second paper covers material that I was previously quite unaware of. Here's the abstract:
"Professor of Economics at the University of Chicago, Henry Schultz, spent a sabbatical year in Europe in 1933/34 working on his forthcoming monograph The Theory and Measurement of Demand (Schultz 1938). During the year he found time to travel in 6-7 countries meeting economists and other scholars. The article describes and comments his seven weeks long visit to Italy in March-April 1934. The glimpses of Henry Schultz in Italy are provided by Schultz’s own brief diary notes during that visit. Henry Schultz was a prominent member of the Econometric Society and had been present at the organization meeting of the Society in 1930. In Italy he met with practically all the leading econometricians in Italy. Schultz was particularly interested in the stand taken by Italian economists on Mussolini’s Corporate State and also in the situation of Jews under fascism. Schultz followed a tourist trail in Italy visiting also Roman and Etruscan remains and a number of places of Christian worship."
My thanks to Olav for alerting me to these two fascinating papers.

© 2014, David E. Giles

Thursday, December 11, 2014

New Features in EViews 9 (Beta)

When you get a chance to check out the "beta" release of EViews 9 (which current users can download from here), you'll find lots of new features.

Many of these relate to the Eviews interface, data handling, and graphs and tables. And then (of course) there are lots of new Econometrics goodies! To summarize them, under the headings used in the documentation:

• Automatic ARIMA forecasting of a series
• Forecast evaluation and combination testing
• Forecast averaging
• VAR Forecasting

• Autoregressive Distributed Lag regression (ARDL) with automatic lag selection
• ML and GLS ARMA estimation
• ARFIMA models
• Pooled mean group estimation of panel data ARDL models
• Threshold regression
• New optimization engine

Testing and Diagnostics
• Unit root tests with a structural break
• Cross-section Dependence Tests
• Panel Effects Tests

I just had to highlight ARDL models. My earlier posts on these models (here and here) attracted a lot of readers, and many questions and comments.

I've been promising a follow-up post on this topic for some time. You can guess why I've been holding off, and what one of my upcoming posts will be about!

© 2014, David E. Giles

Two Non-Problems!

I just love Dick Startz's "byline" on the EViews 9 Beta Forum

"Non-normality and collinearity are NOT problems!"

Why do I like it so much? Regarding "normality", see here, and here. As for "collinearity": see here, here, here, and  here

© 2014, David E. Giles

EViews 9 - Beta Version

If you're an EViews user then you'll be delighted to learn that the beta version of the new EViews 9 was released this morning.

Provided that you have EViews 8.1 on your machine, you can download the beta version of this latest release from

Here's what you'll see:

There are no delays - just make sure that you know if you need the 32-bit or 64-bit version.

I've had the opportunity to play around with the alpha version of EViews 9 over the past few weeks (thanks, Gareth!), and I can assure you that there are lots of really nice goodies in store for you.

I'll be devoting a few posts to some of the new features over the next short while, so stay tuned.

© 2014, David E. Giles

Monday, December 8, 2014

Marc Bellemare on Social Media

Marc Bellemare has been catching my attention recently. On Saturday I had a post that mentioned his talk on "How to Publish Academic Papers". I know that a lot of you have followed this up already.

Today, I just have to mention another of his talks, given last Friday, titled "Social Media for (Academic) Economists". Check out his blog post about the talk, and then look at this slides that are linked there.

Yep, I agree with pretty much everything he has to say. And nope, we're not related!

© 2014, David E. Giles

Sunday, December 7, 2014

"Mastering 'Metrics"

Mastering 'Metrics: The Path From Cause to Effect, by Joshua Angrist and Jörn-Steffen Pischke, is to be published by Princeton University Press later this month. This new book from the authors of Mostly Harmless Econometrics is bound to be well received by students and researchers involved in applied empirical economics. My guess is that the biggest accolades will come from those whose interest is in empirical microeconomics.

You can download and preview the Introduction and Chapter 1.

Apparently the book focuses on:
"The five most valuable econometric methods, or what the authors call the Furious Five - random assignment, regression, instrumental variables, regression discontinuity designs, and differences in differences."
If this sounds interesting to you, then make sure that you take a look at Peter Dizikes' recent post, "How to Conduct Social Science Research", on the World Economic Forum website.

© 2014, David E. Giles