Department of Economics James H.

Stock
Harvard University Fall 2018
ECONOMICS 2142
TIME SERIES ANALYSIS

Syllabus

This course examines the models and statistical techniques used to study time series data in
economics. The course has two specific objectives. The first is to equip students who anticipate
using time series data in their Ph.D. research with the tools they need for state-of-the-art empirical
research. The second objective is to lay out the econometric theory of time series analysis, with an
emphasis on recent developments. Problem sets will have both theoretical and empirical
components. The substantive applications in the course will draw primarily from macroeconomics.
All the topics covered in the course are relevant to empirical applications.

There will be 3-4 problem sets containing both theoretical and computational work, plus a final
research paper. The final grade will consist solely of your grades on the problem sets and paper
(50% weight on problem sets, 50% weight on paper). You are encouraged to work together on the
problem sets, but you should write up problem set solutions on your own. The paper should make a
new contribution to the literature on a topic of your choosing related to those covered in the course.
Unless given explicit permission otherwise, the final research paper shall be sole authored. The
paper can be either theoretical or empirical. Some topics will be suggested over the course of the
semester, and the paper topic should be chosen in consultation with the instructor.

TF: Ben Austin <benjamin_austin@g.harvard.edu>

Textbooks
The primary texts are old but are classic references on the basics: Hamilton (1994) (for models and
methods) and Hayashi (2000) (for GMM and basic limit theorems). Later sections of the course
draws heavily on articles – supplemental readings will be provided subsequently. In any event, the
lectures will be self-contained.

Hamilton, J.D., Time Series Analysis. Princeton: Princeton University Press, 1994. (or
latest edition)

Hayashi, Fumio, Econometrics. Princeton: Princeton University Press, 2000.

Brockwell, P.J. and R.A. Davis, Time Series: Theory and Methods, second edition. New
York: Springer-Verlag, 1991. (The most complete single treatment of classical
stationary time series: probability theory, models, and inference.)

Supplemental Texts (more specialized)

Durbin, James and Siem Jan Koopman (2012), Time Series Analysis by State Space
Methods, Second Edition. Oxford: Oxford University Press. (Excellent treatment of
latent variable models and filtering, both Gaussian and non-Gaussian.)
Economics 2142

Hall, P. and C.C. Heyde (1980). Martingale Limit Theory and its Applications. New York:
Academic Press. (The classic treatment of martingales and convergence on function
spaces.)

Kilian, L. and H. Lutkepohl (2017), Structural Vector Autoregressive Analysis. Cambridge

UK: Cambridge University Press. (Complete treatment of methods for identification
and inference in classical SVARs; no IV)

Lippi, M. (2006), Discrete-Time Stationary Stochastic Processes: Lecture Notes, at

www.lippi.ws. (Complete and accessible treatment of the probability structure
underlying the classical theory of stationary stochastic processes.)

Lutkepohl, H. (2005) A New Introduction to Multiple Time Series Analysis, New York:
Springer Verlag. (Comprehensive treatment of mechanics, estimation, and inference
in VARs, both frequentist and Bayesian, but missing modern SVAR identification.)

Martin, V., S. Hurn and D. Harris (2012). Econometric Modelling with Time Series:
Specification, Estimation and Testing. Cambridge University Press. (recent, with
focus on likelihood-based methods)

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Course schedule

Class Day Date Topic PS schedule

1 Wed 5-Sep Stationary stochastic processes, Wold decomposition
2 Mon 10-Sep Wold decomp ctd, fundamentalness, ARMA models
3 Wed 12-Sep Frequency domain; long-run variance PS1 out
4 Mon 17-Sep CLTs for dependent data
5 Wed 19-Sep HAC & HAR 1
6 Mon 24-Sep HAC & HAR 2
7 Wed 26-Sep HAC & HAR 3
8 Mon 1-Oct Model selection: Information criteria, Lasso PS1 due
9 Wed 3-Oct Empirical processes and FCLT PS2 out
Mon 8-Oct no class - Columbus Day
10 Wed 10-Oct FCLT applications: Unit roots, spurious regression
11 Mon 15-Oct Testing for instability 1: Breaks
12 Wed 17-Oct Testing for instability 2: Parameter drift
13 Mon 22-Oct SVARs 1: Identification problem; invertibility PS2 due
Wed 24-Oct no class
14 Mon 29-Oct SVARs 2: Classical ID methods PS3 out
15 Wed 31-Oct SVARs 3: sign restrictions, SVAR-IV
16 Mon 5-Nov SVARs 4: Local projections, LP-IV
17 Wed 7-Nov Latent variable models 1: the Kalman filter
18 Mon 12-Nov Latent variable models 2: the Markov filter PS3 due
19 Wed 14-Nov Latent variable models 3: Dynamic factor models PS4 out
20 Mon 19-Nov Particle filtering and DSGEs (Guest: Marco del Negro)
Wed 21-Nov No class - Thanksgiving
21 Mon 26-Nov GMM 1: classical GMM
22 Wed 28-Nov GMM 2: Weak instruments
24 Mon 3-Dec GMM 3: Weak ID - GMM PS4 due
25 Wed 5-Dec SVAR-IV, LP-IV with weak instruments

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