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ESF:PMTEII Theory of Econometrics - Course Information

## PMTEII Theory of Econometrics

**Faculty of Economics and Administration**

Autumn 2008

**Extent and Intensity**- 2/1/0. 4 credit(s). Type of Completion: zk (examination).
**Teacher(s)**- RNDr. Dalibor Moravanský, CSc. (lecturer)

RNDr. Dalibor Moravanský, CSc. (seminar tutor) **Guaranteed by**- prof. Ing. Osvald Vašíček, CSc.

Department of Economics - Faculty of Economics and Administration

Contact Person: Lydie Pravdová **Timetable**- Thu 11:05–12:45 P403
- Timetable of Seminar Groups:

PMTEII/2: Thu 14:35–16:15 VT206,*D. Moravanský* **Prerequisites**- Knowledge of the following courses is necessary : - Microeconomics - Macroeconomics - Mathematics - Statistics - Econometric theory I
**Course Enrolment Limitations**- The course is also offered to the students of the fields other than those the course is directly associated with.

The capacity limit for the course is 23 student(s).

Current registration and enrolment status: enrolled:**0**/23, only registered:**0**/23, only registered with preference (fields directly associated with the programme):**0**/23 **fields of study / plans the course is directly associated with**- Mathematics - Economics (programme PřF, N-AM)

**Course objectives**- Theory of Econometrics (PMTEII) The purpose of the course is to acquaint students with the quantitative analysis of economic systems, which results in an economic model that is, by means of mathematical transformation and statistic specification, transformed into an econometric model. Procedures of the econometric model quantification will be clarified, which consists in parameter estimate, data-based model verification, its statistic and econometric verification and in exploiting the model for economic analysis and for programming. Procedures will be presented using real economic systems and data with examples of practical use of the model, serving as a tool of economic decision-making.
**Syllabus**- 1. One-equation linear regression model - basic formulation: properties of statistical estimates in one-equation model. Overview of optimization criteria: LS, ML, LAD, properties of OLS. System of seemingly unrelated regression equations - compact form.
- 2.System of simultaneous structural equations - specification of the model: basic notions,variables, parameters. Classification of the equations: behavioral, identities, institutional and distributional equations. The ways of elimination of the identities, stochastic structure of the model.
- 3.System of the simultaneous structural equations - specification of the model: reduced form of the interdependent model, the matrix of the parameters of the reduced form. Transformation from the structural to reduced form. The problem of the inverse. The properties of the disturbances of the reduced form.
- 4.System of the simultaneous structural equations - specification of the model: The final form of the interdependent model,the matrix of the parameters. The transformation from the structural to final form, interpretation of the parameters of the final form as multipliers, the dynamic equilibrium stability condition.
- 5.System of the simultaneous structural equations - specification of the model: The recursive scheme - the shape of B and sigma matrices, verification of the fulfillment. The advantages of the recursive systems: consistency of the OLS; the closed form of the model. The block-recursive model - the shape of B and sigma matrices, verification
- 6.System of the simultaneous structural equations-estimation of the model: Two-stage least squares 2SLS: motivation, formulation of the estimator and of the asymptotic covariance matrix. The computation of the parameter matrix and residuals of the reduced form.
- 7.System of the simultaneous structural equations - estimation of the model: Estimation of the model by the 2SLS: Variant formulation of the mode after transformation of the initial form of the estimated equation. Relations among submatrices of the 2SLS-estimator. The compact shape of the model.
- 8.System of the simultaneous structural equations - estimation of the model: general instrumental variable method - motivation, formulation of the estimator and its asymptotic covariance matrix. Admissible choices of the instrumental variables.
- 9.System of the simultaneous structural equations - identification of the model: The identification problem: the reasons,classification of the model equations: unidentified,just identified,overidentified, The identification condition. Equivalent model structures. Transformations of the parameters.
- 10.System of the simultaneous structural equations - estimation of the model: Indirect least squares ILS – motivation, formulation of the estimator and its asymptotic covariance matrix. The analysis of the submatrix of the reduced form on which identification depends.
- 11.System of the simultaneous structural equations - estimation of the model: Relations among 2SLS,IV,and ILS estimators: 2SLS and ILS as special cases of the IV. Instruments as a choice or linear combinations of the predetermined variables: the rules of the proper choice
- 12.System of the simultaneous structural equations - special problems: LIML method: principle of the maximum likelihood and its properties. Tests of the model parameters based on the likelihood ratio statistics. A brief description of the FIML estimator - asymptotic properties.
- 13.System of simultaneous structural equations - advanced techniques: Three-stage least squares 3SLS – motivation, formulation of the estimator and its asymptotic covariance matrix. Comparison relative to 2SLS:
- 14.System of simultaneous structural equations -advanced techniques: nonlinear specification: The problem of the estimation of the nonlinear relations. NLLS for one-equation and NL2S for simultaneous model – properties. Tests of the parameters in nonlinear model. The brief description of 2SLAD.

**Literature****Assessment methods**- The explanation is performed in the usual way with the support of audio-visual devices. The written exam lasts 80 minutes and its content consists of 7-8 tasks. To pass it, the 55% points(of the 100%)are required. The oral part of the exam consists in describing 1-2 advanced econometric themes.
**Language of instruction**- Czech
**Further comments (probably available only in Czech)**- Study Materials

The course is taught annually.

Information on course enrolment limitations: v případě více než 24 studentů proběhne cvičení ve 2 skupinách

- Enrolment Statistics (recent)

- Permalink: https://is.muni.cz/course/econ/autumn2008/PMTEII