BA 351: Advanced Econometrics

Prerequisites:
Students should have taken Introduction to Econometrics course or an equivalent
undergraduate course in econometrics. They are supposed to have minimum understanding
about model assumptions, model specification, the standard regression method (i.e. OLS)
and statistical tests (e.g. Student test, Fisher test) and the basic tools and syntaxes of Stata
software (e.g. ado-file, loops, do-fle, mata) and Python programming language (e.g. numpy
lib).
Course content

Introduction:

Why Advanced Econometrics?

I) Regression with non i.i.d errors (Expected duration 9 hours)

1) The generalized last-squares estimator.
2) Heteroskedasticity in the error distribution.
3) Serial correlation in the error distribution.
II) Panel data models: (Expected duration 12 hours)
1) FE and RE models: One-way FE, time effects and two-way FE, the between
estimator, Hausman test, Hsiao test for specification).
2) Seemingly unrelated regression “SUR” models
3) Dynamic panel-data models: GMM estimator (xtabond2 command), Sargan
and Hansen tests for over identification restrictions.
III) Simultaneous Equation Models (SEM) (Expected duration 9 hours)
1) Endogenity in economic relationship.
2) Identification and tests of over identification restrictions.
3) 2SLS
4) The ivreg command.
IV) Models of discrete and limited dependent variables (Expected duration 9 hours)
1) Binomial logit and probit models.
2) Ordered logit and probit models.
3) Truncated regression and tobit models.
Course Learning outcomes
On successful completion of this course, students will be able to:
 1) Choose the appropriate estimation methods when zero conditional mean holds but
the variance of the stochastic disturbance is not constant.
2) Understand and use the advanced econometrics methods such as: GLS, FGLS, fixed
effects, random effects, GMM and 2SLS.
3) Use several tests such as: Breusch and Godfrey test, Durbin-Watson test, Breusch-
Pagan test and White test to diagnostic if the errors are i.i.d or not. Use the Hausman
test to choose between fixed effect and random effect regression. Solve the
endogenity problems by using the instrumental variables techniques.
4) Use statistical software to visualize data and estimate econometric models using
several databases (World Bank, IMF, Eurostat, OECD).
5) Interpret estimates and check for the robustness.

Reading Materials

[1] Baum, C. F. (2016) "An Introduction to Stata Programming" Second Edition. College
Station, TX: Stata Press.
[2] Baum, C. F. (2009) "An Introduction to Modern Econometrics Using Stata Programming"
College Station, TX: Stata Press.
[3] Wooldridge J.M (2010) "Econometric Analysis of Cross Section and Panel Data" MIT Press.
[4] Matyas L. and P. Sevestre (2008) "The Econometrics of Panel Data", Springer-Verlag,
Berlin
[5] Greene W. H (2011) "Econometric Analysis", (7th edition), Pearson Prentice Hall.