Econometric Analysis 2 Winter 2023
ECON 323

Topics covered

The following is an overview of the topics we will cover this term.  We will spend approximately two weeks per topics. The lecture notes will be posted on Learn during the term.  Reading the lecture notes is not a sufficient condition to pass the course. They are complementary to what we be covered in class. It is therefore required for the students to attend class. If you miss a lecture, it is the student's responsibility to find the notes from a classmate. 

1. Review of ECON 322 
   During the first two weeks (or less), we will summarise the most important results from ECON 322 that you need for this course. 
   Reference: Lecture Notes: ECON322-Review.pdf
2. Maximum Likelihood Estimators (MLE) and the Generalized Linear Model (GLM)
   The OLS regression can be seen as an MLE estimator in which the conditional mean of the dependent variable is a linear function of the independent variables and the error term is normally distributed. We will generalise the concept  by assuming that a nonlinear transformation of the conditional mean of the dependent variable is a linear functions of the independent variables, and by assuming that the error term has a non-normal distribution. Applications include models with count data (e.g. number of children) and models with binary response variables (e.g. 1 if the mortgage application is approved and 0 otherwise).
   Reference: Lecture Notes GLM.pdf
3. Introduction to Univariate Time Series Analysis.
   Before presenting the properties of OLS when the independent and independent variables are time series, we present models to explain the behaviour if a time series over time. In particular, we want to differentiate trend stationary process to unit root processes. This distinction is important to avoid falling in the trap of detecting spurious relationships.
   Reference: Lecture Notes TS.pdf
4. Regressions with Time Series
   We present the properties of OLS regressions when the variables are time series. We will learn how to perform robust inference, how to test for serial correlation of the residuals and how to estimate a model using the generalized least squares (GLS) method for time series.
   Reference: Lecture Notes OLSforTS.pdf
5. Introduction to regression with Panel Data
   We will present different methods to estimate models using data that are observed across individuals and over time at the same time.  The methods include pooling regression, fixed effects and random effects estimation.
   Reference: Lecture Notes Panel.pdf
6. Instrumental Variables
   The instrumental variable method is one solution to the problem of endogenous regressors. 
   Reference: Lecture Notes IV.pdf
7. Other Methods to Measure Causality (if time permits)
   We will present other methods such as difference-in-differences, matching or inverse probability methods.  Without going into too much details, understanding these methods help understanding what causality means and why it is hard to measure using regressions.
   Reference: Lecture Notes Causal.pdf

Assignments and/or Quizzes

You will have almost weekly assignments or quizzes.  If it is an assignment, the questions will be posted on the Monday and it will due the following Monday. I will post details on the Announcement section of Learn. When it is a Quiz, you will have 24 hours to complete it from the Sunday 11:30pm until the Monday 11:30pm.  

The first assignment is due Monday January 16 and it is meant to verify that you have all the necessary software installed on your computer. If you do not have a computer, Arts labs have the software that you need for the course. More details will be given on Learn and in your first Tutorial session.

Note on the references

I will post lecture notes on Learn for the course and it is all you need. However, if you need an external reference because you have problems understanding some concepts, the proposed textbooks are good references.  

There are many references on how to use R in Econometrics. I am just proposing one. You have the option of purchasing it or to read the online version for free. You can also find manuals for all levels on the main R page: https://cran.r-project.org/other-docs.html

Software for the course

All students are required to use R in all their assignments. 

The first step is to make sure you have the required software installed on your computer. Install the software
in the following order:

1. R: Go to https://www.r-project.org/ and install the program for your operating system. If you already have R installed, I recommend you install the most recent version.
2. This is not required but recommended. It allows to create a PDF at the click of a button using Latex. You do not need to know Latex for the course, but some of you will find it useful for writing research papers (even some assignments in other courses). Some have problems installing it on their computer (especially Windows laptop), so it is fine if you don't. Without this software, you will be able to create Word documents also at the click of a button.  If you have a Windows machine, install MikTex at https://miktex.org/ and if you have a Mac you have to install MacTex at https://www.tug.org/mactex/
3. The easiest way to learn R is to use the developement tool Rstudio. You can install it from https://posit.co/

You will be introduced to R-Markdown in your tutorials. This is a tool to create nice documents without leaving Rstudio. Graphs, tables are automatically generated when you create your PDF. It is so simple that you will never go back to the copy-paste method using a word processor. You can get information on the following page: https://www.markdownguide.org/basic-syntax/

Course Policies

Assignments:

It is highly recommended not to miss any assignment. They are essential to understand the material and to prepare for the exams. If you start the assignment on the day the questions are posted, you have enough time to complete them on time. Therefore, being sick one day or choosing to take a short absence is not considered a valid reason for not submitting an assignment. 

• The penalty for late submissions is 20% per day up to three days. After three days, you get 0.
• If for some extenuating circumstances (approved by the instructor) you cannot submit your assignment, the weight will be moved to the final.  

Quizzes and Midterms

As for the assignments, quizzes are important to prepare for the exams. It is therefore important not to miss them. 

• If you miss a quiz because of a short absence, a self declaration of illness or if you provide the instructor with a VIF, the weight is moved to the finak exam.
• If you miss a midterm because of a short absence, a self declaration of illness or if you provide the instructor with a VIF, the weight is moved to the finak exam.
• The instructor must be informed that you miss a quiz or midterm within 48 hours by email. Failing to do so will result in a grade of 0. 

Note that it is easier to get points on assignments, quizzes and midterms. It is therefore important to minimize the proportion of the assessments shifted to the final exam. The latter is cummulative and therefore more difficult than the other assessments. 

Do not wait too long to ask for help

The instructor is available to answer all your questions by email, on the Learn discussion forum or in person. If you are struggling, do not wait too long to as your instructor for assistance. It is recommended to review the material on a weekly basis and ask questions when you do not understand. There are no stupid questions, so don't be embarassed to ask any question. 

Economics Department Deferred Final Exam Policy

All deferred Final Exam requests for economics courses are administered by the Economics Undergraduate Office. Please consult the Deferred Exam Policy at 

https://uwaterloo.ca/economics/undergraduate/resources-and-policies/deferred-final-exam-policy.

Intellectual Property

Students should be aware that this course contains the intellectual property of their instructor, TA, and/or the University of Waterloo. 

Intellectual property includes items such as:

• Lecture content, spoken and written (and any audio/video recording thereof);
• Lecture handouts, presentations, and other materials prepared for the course (e.g., PowerPoint slides);
• Questions or solution sets from various types of assessments (e.g., assignments, quizzes, tests, final exams); and
• Work protected by copyright (e.g., any work authored by the instructor or TA or used by the instructor or TA with permission of the copyright owner).

Course materials and the intellectual property contained therein, are used to enhance a student’s educational experience. However, sharing this intellectual property without the intellectual property owner’s permission is a violation of intellectual property rights.  For this reason, it is necessary to ask the instructor, TA and/or the University of Waterloo for permission before uploading and sharing the intellectual property of others online (e.g., to an online repository).

Permission from an instructor, TA or the University is also necessary before sharing the intellectual property of others from completed courses with students taking the same/similar courses in subsequent terms/years.  In many cases, instructors might be happy to allow distribution of certain materials. However, doing so without expressed permission is considered a violation of intellectual property rights.

Please alert the instructor if you become aware of intellectual property belonging to others (past or present) circulating, either through the student body or online. The intellectual property rights owner deserves to know (and may have already given their consent).

Mental Health Support

All of us need a support system. The faculty and staff in Arts encourage students to seek out mental health support if they are needed.

On Campus

Due to COVID-19 and campus closures, services are available only online or by phone.

• Counselling Services:  counselling.services@uwaterloo.ca / 519-888-4567 ext. 32655
• MATES:  one-to-one peer support program offered by the Waterloo Undergraduate Student Association (WUSA) and Counselling Services

Off campus, 24/7

• Good2Talk:  Free confidential help line for post-secondary students. Phone: 1-866-925-5454
• Grand River Hospital: Emergency care for mental health crisis. Phone: 519-749-4300 ext. 6880
• Here 24/7: Mental Health and Crisis Service Team. Phone: 1-844-437-3247
• OK2BME: set of support services for lesbian, gay, bisexual, transgender or questioning teens in Waterloo.  Phone: 519-884-0000 extension 213

Full details can be found online on the Faculty of Arts website

Download UWaterloo and regional mental health resources (PDF)

Download the WatSafe app to your phone to quickly access mental health support information.

Academic freedom at the University of Waterloo

Policy 33, Ethical Behaviour states, as one of its general principles (Section 1), “The University supports academic freedom for all members of the University community. Academic freedom carries with it the duty to use that freedom in a manner consistent with the scholarly obligation to base teaching and research on an honest and ethical quest for knowledge. In the context of this policy, 'academic freedom' refers to academic activities, including teaching and scholarship, as is articulated in the principles set out in the Memorandum of Agreement between the FAUW and the University of Waterloo, 1998 (Article 6). The academic environment which fosters free debate may from time to time include the presentation or discussion of unpopular opinions or controversial material. Such material shall be dealt with as openly, respectfully and sensitively as possible.” This definition is repeated in Policies 70 and 71, and in the Memorandum of Agreement, Section 6

Territorial Acknowledgement: The University of Waterloo acknowledges that much of our work takes place on the traditional territory of the Neutral, Anishinaabeg and Haudenosaunee peoples. Our main campus is situated on the Haldimand Tract, the land granted to the Six Nations that includes six miles on each side of the Grand River. Our active work toward reconciliation takes place across our campuses through research, learning, teaching, and community building, and is centralized within the Office of Indigenous Relations

Academic integrity: In order to maintain a culture of academic integrity, members of the University of Waterloo community are expected to promote honesty, trust, fairness, respect and responsibility. [Check the Office of Academic Integrity for more information.]

Grievance: A student who believes that a decision affecting some aspect of their university life has been unfair or unreasonable may have grounds for initiating a grievance. Read Policy 70, Student Petitions and Grievances, Section 4. When in doubt, please be certain to contact the department’s administrative assistant who will provide further assistance.

Discipline: A student is expected to know what constitutes academic integrity to avoid committing an academic offence, and to take responsibility for their actions. [Check the Office of Academic Integrity for more information.] A student who is unsure whether an action constitutes an offence, or who needs help in learning how to avoid offences (e.g., plagiarism, cheating) or about “rules” for group work/collaboration should seek guidance from the course instructor, academic advisor, or the undergraduate associate dean. For information on categories of offences and types of penalties, students should refer to Policy 71, Student Discipline. For typical penalties, check Guidelines for the Assessment of Penalties.

Appeals: A decision made or penalty imposed under Policy 70, Student Petitions and Grievances (other than a petition) or Policy 71, Student Discipline may be appealed if there is a ground. A student who believes they have a ground for an appeal should refer to Policy 72, Student Appeals.

Note for students with disabilities: AccessAbility Services, located in Needles Hall, Room 1401, collaborates with all academic departments to arrange appropriate accommodations for students with disabilities without compromising the academic integrity of the curriculum. If you require academic accommodations to lessen the impact of your disability, please register with AccessAbility Services at the beginning of each academic term.

Turnitin.com: Text matching software (Turnitin®) may be used to screen assignments in this course. Turnitin® is used to verify that all materials and sources in assignments are documented. Students' submissions are stored on a U.S. server, therefore students must be given an alternative (e.g., scaffolded assignment or annotated bibliography), if they are concerned about their privacy and/or security. Students will be given due notice, in the first week of the term and/or at the time assignment details are provided, about arrangements and alternatives for the use of Turnitin in this course.

It is the responsibility of the student to notify the instructor if they, in the first week of term or at the time assignment details are provided, wish to submit alternate assignment.