(eBook PDF) Basic Econometrics 5th

Edition by Gujarati
Go to download the full and correct content document:
https://ebooksecure.com/product/ebook-pdf-basic-econometrics-5th-edition-by-gujarat
i/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...

(eBook PDF) Principles of Econometrics, 5th Edition

http://ebooksecure.com/product/ebook-pdf-principles-of-
econometrics-5th-edition/

(eBook PDF) Practical Econometrics by Hilmer

http://ebooksecure.com/product/ebook-pdf-practical-econometrics-
by-hilmer/

(eBook PDF) Econometrics by Example 2nd Edition

http://ebooksecure.com/product/ebook-pdf-econometrics-by-
example-2nd-edition/

(eBook PDF) Basic Chemistry, Global Edition 5th by

Karen C. Timberlake

http://ebooksecure.com/product/ebook-pdf-basic-chemistry-global-
edition-5th-by-karen-c-timberlake/
Basic Chemistry 5th Edition (eBook PDF)

http://ebooksecure.com/product/basic-chemistry-5th-edition-ebook-
pdf/

(eBook PDF) Basic Chemistry 5th Edition

http://ebooksecure.com/product/ebook-pdf-basic-chemistry-5th-
edition/

Progress in Heterocyclic Chemistry Volume 29 1st

Edition - eBook PDF

https://ebooksecure.com/download/progress-in-heterocyclic-
chemistry-ebook-pdf/

(eBook PDF) Using Econometrics A Practical Guide 6th by

Studenmund

http://ebooksecure.com/product/ebook-pdf-using-econometrics-a-
practical-guide-6th-by-studenmund/

(eBook PDF) Essentials of Applied Econometrics by Aaron

D. Smith

http://ebooksecure.com/product/ebook-pdf-essentials-of-applied-
econometrics-by-aaron-d-smith/
guj75772_fm.qxd 05/09/2008 11:15 AM Page vi

Contents
Preface xvi Summary and Conclusions 28
Acknowledgments xix Exercises 29

Introduction 1 CHAPTER 2
I.1 What Is Econometrics? 1 Two-Variable Regression Analysis: Some
I.2 Why a Separate Discipline? 2 Basic Ideas 34
I.3 Methodology of Econometrics 2 2.1 A Hypothetical Example 34
1. Statement of Theory or Hypothesis 3 2.2 The Concept of Population Regression
2. Specification of the Mathematical Model Function (PRF) 37
of Consumption 3 2.3 The Meaning of the Term Linear 38
3. Specification of the Econometric Model Linearity in the Variables 38
of Consumption 4 Linearity in the Parameters 38
4. Obtaining Data 5 2.4 Stochastic Specification of PRF 39
5. Estimation of the Econometric Model 5 2.5 The Significance of the Stochastic
6. Hypothesis Testing 7 Disturbance Term 41
7. Forecasting or Prediction 8 2.6 The Sample Regression Function (SRF) 42
8. Use of the Model for Control 2.7 Illustrative Examples 45
or Policy Purposes 9 Summary and Conclusions 48
Choosing among Competing Models 9 Exercises 48
I.4 Types of Econometrics 10
I.5 Mathematical and Statistical Prerequisites 11 CHAPTER 3
I.6 The Role of the Computer 11 Two-Variable Regression Model: The
I.7 Suggestions for Further Reading 12 Problem of Estimation 55
PART ONE 3.1 The Method of Ordinary Least Squares 55
3.2 The Classical Linear Regression Model: The
SINGLE-EQUATION REGRESSION
Assumptions Underlying the Method
MODELS 13 of Least Squares 61
CHAPTER 1 A Word about These Assumptions 68
3.3 Precision or Standard Errors
The Nature of Regression Analysis 15
of Least-Squares Estimates 69
1.1 Historical Origin of the Term Regression 15 3.4 Properties of Least-Squares Estimators:
1.2 The Modern Interpretation of Regression 15 The Gauss–Markov Theorem 71
Examples 16 3.5 The Coefficient of Determination r2:
1.3 Statistical versus Deterministic A Measure of “Goodness of Fit” 73
Relationships 19 3.6 A Numerical Example 78
1.4 Regression versus Causation 19 3.7 Illustrative Examples 81
1.5 Regression versus Correlation 20 3.8 A Note on Monte Carlo Experiments 83
1.6 Terminology and Notation 21 Summary and Conclusions 84
1.7 The Nature and Sources of Data for Economic Exercises 85
Analysis 22 Appendix 3A 92
Types of Data 22 3A.1 Derivation of Least-Squares Estimates 92
The Sources of Data 25 3A.2 Linearity and Unbiasedness Properties
The Accuracy of Data 27 of Least-Squares Estimators 92
A Note on the Measurement Scales 3A.3 Variances and Standard Errors
of Variables 27 of Least-Squares Estimators 93
vi
guj75772_fm.qxd 05/09/2008 11:15 AM Page vii

Contents vii

3A.4 Covariance Between β̂1 and β̂ 2 93 The “Zero” Null Hypothesis and the “2-t” Rule
3A.5 The Least-Squares Estimator of σ2 93 of Thumb 120
3A.6 Minimum-Variance Property Forming the Null and Alternative
of Least-Squares Estimators 95 Hypotheses 121
3A.7 Consistency of Least-Squares Estimators 96 Choosing α, the Level of Significance 121
The Exact Level of Significance:
CHAPTER 4 The p Value 122
Classical Normal Linear Regression Statistical Significance versus Practical
Model (CNLRM) 97 Significance 123
The Choice between Confidence-Interval
4.1 The Probability Distribution and Test-of-Significance Approaches
of Disturbances ui 97 to Hypothesis Testing 124
4.2 The Normality Assumption for ui 98 5.9 Regression Analysis and Analysis
Why the Normality Assumption? 99
of Variance 124
4.3 Properties of OLS Estimators under 5.10 Application of Regression Analysis:
the Normality Assumption 100 The Problem of Prediction 126
4.4 The Method of Maximum Mean Prediction 127
Likelihood (ML) 102 Individual Prediction 128
Summary and Conclusions 102 5.11 Reporting the Results of Regression
Appendix 4A 103 Analysis 129
4A.1 Maximum Likelihood Estimation 5.12 Evaluating the Results of Regression
of Two-Variable Regression Model 103 Analysis 130
4A.2 Maximum Likelihood Estimation Normality Tests 130
of Food Expenditure in India 105 Other Tests of Model Adequacy 132
Appendix 4A Exercises 105 Summary and Conclusions 134
Exercises 135
CHAPTER 5
Appendix 5A 143
Two-Variable Regression: Interval 5A.1 Probability Distributions Related
Estimation and Hypothesis Testing 107 to the Normal Distribution 143
5.1 Statistical Prerequisites 107 5A.2 Derivation of Equation (5.3.2) 145
5.2 Interval Estimation: Some Basic Ideas 108 5A.3 Derivation of Equation (5.9.1) 145
5.3 Confidence Intervals for Regression 5A.4 Derivations of Equations (5.10.2)
Coefficients β1 and β2 109 and (5.10.6) 145
Confidence Interval for β2 109 Variance of Mean Prediction 145
Confidence Interval for β1 and β2 Variance of Individual Prediction 146
Simultaneously 111
5.4 Confidence Interval for σ2 111 CHAPTER 6
5.5 Hypothesis Testing: General Comments 113 Extensions of the Two-Variable Linear
5.6 Hypothesis Testing:
Regression Model 147
The Confidence-Interval Approach 113
Two-Sided or Two-Tail Test 113 6.1 Regression through the Origin 147
One-Sided or One-Tail Test 115 r2 for Regression-through-Origin Model 150
5.7 Hypothesis Testing: 6.2 Scaling and Units of Measurement 154
The Test-of-Significance Approach 115 A Word about Interpretation 157
Testing the Significance of Regression 6.3 Regression on Standardized Variables 157
Coefficients: The t Test 115 6.4 Functional Forms of Regression Models 159
Testing the Significance of σ2: The χ2 Test 118 6.5 How to Measure Elasticity: The Log-Linear
5.8 Hypothesis Testing: Some Practical Aspects 119 Model 159
The Meaning of “Accepting” or “Rejecting” a 6.6 Semilog Models: Log–Lin and Lin–Log
Hypothesis 119 Models 162
guj75772_fm.qxd 05/09/2008 11:15 AM Page viii

viii Contents

How to Measure the Growth Rate: Allocating R2 among Regressors 206

–
The Log–Lin Model 162 The “Game’’ of Maximizing R2 206
The Lin–Log Model 164 7.9 The Cobb–Douglas Production Function:
6.7 Reciprocal Models 166 More on Functional Form 207
Log Hyperbola or Logarithmic Reciprocal 7.10 Polynomial Regression Models 210
Model 172 7.11 Partial Correlation Coefficients 213
6.8 Choice of Functional Form 172 Explanation of Simple and Partial
6.9 A Note on the Nature of the Stochastic Error Correlation Coefficients 213
Term: Additive versus Multiplicative Interpretation of Simple and Partial
Stochastic Error Term 174 Correlation Coefficients 214
Summary and Conclusions 175 Summary and Conclusions 215
Exercises 176 Exercises 216
Appendix 6A 182 Appendix 7A 227
6A.1 Derivation of Least-Squares Estimators 7A.1 Derivation of OLS Estimators
for Regression through the Origin 182 Given in Equations (7.4.3) to (7.4.5) 227
6A.2 Proof that a Standardized Variable 7A.2 Equality between the Coefficients of PGNP
Has Zero Mean and Unit Variance 183 in Equations (7.3.5) and (7.6.2) 229
6A.3 Logarithms 184 7A.3 Derivation of Equation (7.4.19) 229
6A.4 Growth Rate Formulas 186 7A.4 Maximum Likelihood Estimation
6A.5 Box-Cox Regression Model 187 of the Multiple Regression Model 230
7A.5 EViews Output of the Cobb–Douglas
CHAPTER 7 Production Function in
Equation (7.9.4) 231
Multiple Regression Analysis:
The Problem of Estimation 188
CHAPTER 8
7.1 The Three-Variable Model: Notation
Multiple Regression Analysis: The Problem
and Assumptions 188
7.2 Interpretation of Multiple Regression
of Inference 233
Equation 191 8.1 The Normality Assumption Once Again 233
7.3 The Meaning of Partial Regression 8.2 Hypothesis Testing in Multiple Regression:
Coefficients 191 General Comments 234
7.4 OLS and ML Estimation of the Partial 8.3 Hypothesis Testing about Individual
Regression Coefficients 192 Regression Coefficients 235
OLS Estimators 192 8.4 Testing the Overall Significance of the Sample
Variances and Standard Errors Regression 237
of OLS Estimators 194 The Analysis of Variance Approach to Testing the
Properties of OLS Estimators 195 Overall Significance of an Observed Multiple
Maximum Likelihood Estimators 196 Regression: The F Test 238
7.5 The Multiple Coefficient of Determination R2 Testing the Overall Significance of a Multiple
and the Multiple Coefficient Regression: The F Test 240
of Correlation R 196 An Important Relationship between R2 and F 241
7.6 An Illustrative Example 198 Testing the Overall Significance of a Multiple
Regression on Standardized Variables 199 Regression in Terms of R2 242
Impact on the Dependent Variable of a Unit The “Incremental” or “Marginal” Contribution
Change in More than One Regressor 199 of an Explanatory Variable 243
7.7 Simple Regression in the Context 8.5 Testing the Equality of Two Regression
of Multiple Regression: Introduction to Coefficients 246
Specification Bias 200 8.6 Restricted Least Squares: Testing Linear
7.8 R2 and the Adjusted R2 201 Equality Restrictions 248
Comparing Two R2 Values 203 The t-Test Approach 249
guj75772_fm.qxd 05/09/2008 11:15 AM Page ix
The F-Test Approach: Restricted Least
Squares 249
General F Testing 252
8.7 Testing for Structural or Parameter Stability
of Regression Models: The Chow Test 254
8.8 Prediction with Multiple Regression 259
8.9 The Troika of Hypothesis Tests: The
Likelihood Ratio (LR), Wald (W), and
Lagrange Multiplier (LM) Tests 259
8.10 Testing the Functional Form of Regression:
Choosing between Linear and Log–Linear
Regression Models 260
Summary and Conclusions 262
Exercises 262
Appendix 8A: Likelihood
Ratio (LR) Test 274
CHAPTER 9
Dummy Variable Regression Models
9.1 The Nature of Dummy Variables 277
9.2 ANOVA Models 278
Caution in the Use of Dummy Variables
9.3 ANOVA Models with Two Qualitative
Variables 283
9.4 Regression with a Mixture of Quantitative
and Qualitative Regressors: The ANCOVA
Models 283
9.5 The Dummy Variable Alternative
to the Chow Test 285
9.6 Interaction Effects Using Dummy
Variables 288
9.7 The Use of Dummy Variables in Seasonal
Analysis 290
9.8 Piecewise Linear Regression 295
9.9 Panel Data Regression Models 297
9.10 Some Technical Aspects of the Dummy
Variable Technique 297
The Interpretation of Dummy Variables
in Semilogarithmic Regressions 297
Dummy Variables and Heteroscedasticity 298
Dummy Variables and Autocorrelation 299
What Happens If the Dependent Variable
Is a Dummy Variable? 299
9.11 Topics for Further Study 300
9.12 A Concluding Example 300
Summary and Conclusions 304
Exercises 305
Appendix 9A: Semilogarithmic Regression
with Dummy Regressor 314
Contents ix
PART TWO
RELAXING THE ASSUMPTIONS OF THE
CLASSICAL MODEL 315
CHAPTER 10
Multicollinearity: What Happens
If the Regressors Are Correlated? 320
10.1 The Nature of Multicollinearity 321
10.2 Estimation in the Presence of Perfect
Multicollinearity 324
10.3 Estimation in the Presence of “High”
but “Imperfect” Multicollinearity 325
10.4 Multicollinearity: Much Ado about Nothing?
Theoretical Consequences
of Multicollinearity 326
10.5 Practical Consequences
of Multicollinearity 327
277 Large Variances and Covariances
of OLS Estimators 328
Wider Confidence Intervals 330
“Insignificant” t Ratios 330
281 A High R2 but Few Significant t Ratios 331
Sensitivity of OLS Estimators and Their
Standard Errors to Small Changes in Data 331
Consequences of Micronumerosity 332
10.6 An Illustrative Example 332
10.7 Detection of Multicollinearity 337
10.8 Remedial Measures 342
Do Nothing 342
Rule-of-Thumb Procedures 342
10.9 Is Multicollinearity Necessarily Bad? Maybe
Not, If the Objective Is Prediction Only 347
10.10 An Extended Example: The Longley
Data 347
Summary and Conclusions 350
Exercises 351
CHAPTER 11
Heteroscedasticity: What Happens If
the Error Variance Is Nonconstant? 365
11.1 The Nature of Heteroscedasticity 365
11.2 OLS Estimation in the Presence
of Heteroscedasticity 370
11.3 The Method of Generalized Least
Squares (GLS) 371
Difference between OLS and GLS 373
11.4 Consequences of Using OLS in the Presence
of Heteroscedasticity 374
guj75772_fm.qxd 05/09/2008 11:15 AM Page x

x Contents

OLS Estimation Allowing for 12.7 What to Do When You Find Autocorrelation:
Heteroscedasticity 374 Remedial Measures 440
OLS Estimation Disregarding 12.8 Model Mis-Specification versus Pure
Heteroscedasticity 374 Autocorrelation 441
A Technical Note 376 12.9 Correcting for (Pure) Autocorrelation:
11.5 Detection of Heteroscedasticity 376 The Method of Generalized Least
Informal Methods 376 Squares (GLS) 442
Formal Methods 378 When ρ Is Known 442
11.6 Remedial Measures 389 When ρ Is Not Known 443
When σ 2i Is Known: The Method of Weighted 12.10 The Newey–West Method of Correcting
Least Squares 389 the OLS Standard Errors 447
When σ 2i Is Not Known 391 12.11 OLS versus FGLS and HAC 448
11.7 Concluding Examples 395 12.12 Additional Aspects of Autocorrelation 449
11.8 A Caution about Overreacting Dummy Variables and Autocorrelation 449
to Heteroscedasticity 400 ARCH and GARCH Models 449
Summary and Conclusions 400 Coexistence of Autocorrelation
Exercises 401 and Heteroscedasticity 450
Appendix 11A 409 12.13 A Concluding Example 450
11A.1 Proof of Equation (11.2.2) 409 Summary and Conclusions 452
11A.2 The Method of Weighted Least Exercises 453
Squares 409 Appendix 12A 466
11A.3 Proof that E(σ̂ 2 ) σ2 in the Presence 12A.1 Proof that the Error Term vt in
of Heteroscedasticity 410 Equation (12.1.11) Is Autocorrelated 466
11A.4 White’s Robust Standard Errors 411 12A.2 Proof of Equations (12.2.3), (12.2.4),
and (12.2.5) 466
CHAPTER 12
Autocorrelation: What Happens If the Error CHAPTER 13
Terms Are Correlated? 412 Econometric Modeling: Model Specification
and Diagnostic Testing 467
12.1 The Nature of the Problem 413
12.2 OLS Estimation in the Presence 13.1 Model Selection Criteria 468
of Autocorrelation 418 13.2 Types of Specification Errors 468
12.3 The BLUE Estimator in the Presence 13.3 Consequences of Model Specification
of Autocorrelation 422 Errors 470
12.4 Consequences of Using OLS Underfitting a Model (Omitting a Relevant
in the Presence of Autocorrelation 423 Variable) 471
OLS Estimation Allowing Inclusion of an Irrelevant Variable
for Autocorrelation 423 (Overfitting a Model) 473
OLS Estimation Disregarding 13.4 Tests of Specification Errors 474
Autocorrelation 423 Detecting the Presence of Unnecessary Variables
12.5 Relationship between Wages and Productivity (Overfitting a Model) 475
in the Business Sector of the United States, Tests for Omitted Variables and Incorrect
1960–2005 428 Functional Form 477
12.6 Detecting Autocorrelation 429 13.5 Errors of Measurement 482
I. Graphical Method 429 Errors of Measurement in the Dependent
II. The Runs Test 431 Variable Y 482
III. Durbin–Watson d Test 434 Errors of Measurement in the Explanatory
IV. A General Test of Autocorrelation: Variable X 483
The Breusch–Godfrey (BG) Test 438 13.6 Incorrect Specification of the Stochastic
Why So Many Tests of Autocorrelation? 440 Error Term 486
guj75772_fm.qxd 09/09/2008 12:15 PM Page xi
13.7 Nested versus Non-Nested Models 487
13.8 Tests of Non-Nested Hypotheses 488
The Discrimination Approach 488
The Discerning Approach 488
13.9 Model Selection Criteria 493
The R2 Criterion 493
Adjusted R2 493
Akaike’s Information Criterion (AIC) 494
Schwarz’s Information Criterion (SIC) 494
Mallows’s Cp Criterion 494
A Word of Caution about Model
Selection Criteria 495
Forecast Chi-Square (χ2) 496
13.10 Additional Topics in Econometric
Modeling 496
Outliers, Leverage, and Influence 496
Recursive Least Squares 498
Chow’s Prediction Failure Test 498
Missing Data 499
13.11 Concluding Examples 500
1. A Model of Hourly Wage Determination 500
2. Real Consumption Function for the United
States, 1947–2000 505
13.12 Non-Normal Errors and Stochastic
Regressors 509
1. What Happens If the Error Term Is Not
Normally Distributed? 509
2. Stochastic Explanatory Variables 510
13.13 A Word to the Practitioner 511
Summary and Conclusions 512
Exercises 513
Appendix 13A 519
13A.1 The Proof that E(b1 2) = β2 + β3b3 2
[Equation (13.3.3)] 519
13A.2 The Consequences of Including an Irrelevant
Variable: The Unbiasedness Property 520
13A.3 The Proof of Equation (13.5.10) 521
13A.4 The Proof of Equation (13.6.2) 522
PART THREE
TOPICS IN ECONOMETRICS 523
CHAPTER 14
Nonlinear Regression Models 525
14.1 Intrinsically Linear and Intrinsically
Nonlinear Regression Models 525
14.2 Estimation of Linear and Nonlinear
Regression Models 527
Contents xi
14.3 Estimating Nonlinear Regression Models:
The Trial-and-Error Method 527
14.4 Approaches to Estimating Nonlinear
Regression Models 529
Direct Search or Trial-and-Error
or Derivative-Free Method 529
Direct Optimization 529
Iterative Linearization Method 530
14.5 Illustrative Examples 530
Summary and Conclusions 535
Exercises 535
Appendix 14A 537
14A.1 Derivation of Equations (14.2.4)
and (14.2.5) 537
14A.2 The Linearization Method 537
14A.3 Linear Approximation of the Exponential
Function Given in Equation (14.2.2) 538
CHAPTER 15
Qualitative Response Regression Models 541
15.1 The Nature of Qualitative Response
Models 541
15.2 The Linear Probability Model (LPM) 543
Non-Normality of the Disturbances ui 544
Heteroscedastic Variances
of the Disturbances 544
Nonfulfillment of 0 ≤ E(Yi | Xi) ≤ 1 545
Questionable Value of R2 as a Measure
of Goodness of Fit 546
15.3 Applications of LPM 549
15.4 Alternatives to LPM 552
15.5 The Logit Model 553
15.6 Estimation of the Logit Model 555
Data at the Individual Level 556
Grouped or Replicated Data 556
15.7 The Grouped Logit (Glogit) Model: A
Numerical Example 558
Interpretation of the Estimated Logit
Model 558
15.8 The Logit Model for Ungrouped
or Individual Data 561
15.9 The Probit Model 566
Probit Estimation with Grouped
Data: gprobit 567
The Probit Model for Ungrouped
or Individual Data 570
The Marginal Effect of a Unit Change
in the Value of a Regressor in the Various
Regression Models 571
guj75772_fm.qxd 09/09/2008 12:15 PM Page xii

xii Contents

15.10 Logit and Probit Models 571 17.3 Estimation of Distributed-Lag Models 623
15.11 The Tobit Model 574 Ad Hoc Estimation of Distributed-Lag
Illustration of the Tobit Model: Ray Fair’s Model Models 623
of Extramarital Affairs 575 17.4 The Koyck Approach to Distributed-Lag
15.12 Modeling Count Data: The Poisson Models 624
Regression Model 576 The Median Lag 627
15.13 Further Topics in Qualitative Response The Mean Lag 627
Regression Models 579 17.5 Rationalization of the Koyck Model: The
Ordinal Logit and Probit Models 580 Adaptive Expectations Model 629
Multinomial Logit and Probit Models 580 17.6 Another Rationalization of the Koyck Model:
Duration Models 580 The Stock Adjustment, or Partial Adjustment,
Summary and Conclusions 581 Model 632
Exercises 582 17.7 Combination of Adaptive Expectations
Appendix 15A 589 and Partial Adjustment Models 634
15A.1 Maximum Likelihood Estimation of the Logit 17.8 Estimation of Autoregressive Models 634
and Probit Models for Individual (Ungrouped) 17.9 The Method of Instrumental
Data 589 Variables (IV) 636
17.10 Detecting Autocorrelation in Autoregressive
CHAPTER 16 Models: Durbin h Test 637
17.11 A Numerical Example: The Demand for
Panel Data Regression Models 591
Money in Canada, 1979–I to 1988–IV 639
16.1 Why Panel Data? 592 17.12 Illustrative Examples 642
16.2 Panel Data: An Illustrative Example 593 17.13 The Almon Approach to Distributed-Lag
16.3 Pooled OLS Regression or Constant Models: The Almon or Polynomial Distributed
Coefficients Model 594 Lag (PDL) 645
16.4 The Fixed Effect Least-Squares Dummy 17.14 Causality in Economics: The Granger
Variable (LSDV) Model 596 Causality Test 652
A Caution in the Use of the Fixed Effect The Granger Test 653
LSDV Model 598 A Note on Causality and Exogeneity 657
16.5 The Fixed-Effect Within-Group (WG) Summary and Conclusions 658
Estimator 599 Exercises 659
16.6 The Random Effects Model (REM) 602 Appendix 17A 669
Breusch and Pagan Lagrange 17A.1 The Sargan Test for the Validity
Multiplier Test 605 of Instruments 669
16.7 Properties of Various Estimators 605
16.8 Fixed Effects versus Random Effects Model:
Some Guidelines 606 PART FOUR
16.9 Panel Data Regressions: Some Concluding SIMULTANEOUS-EQUATION
Comments 607 MODELS AND TIME SERIES
16.10 Some Illustrative Examples 607 ECONOMETRICS 671
Summary and Conclusions 612
Exercises 613
CHAPTER 18
Simultaneous-Equation Models 673
CHAPTER 17
Dynamic Econometric Models: Autoregressive 18.1 The Nature of Simultaneous-Equation
and Distributed-Lag Models 617 Models 673
18.2 Examples of Simultaneous-Equation
17.1 The Role of “Time,’’ or “Lag,’’ Models 674
in Economics 618 18.3 The Simultaneous-Equation Bias:
17.2 The Reasons for Lags 622 Inconsistency of OLS Estimators 679
guj75772_fm.qxd 05/09/2008 11:15 AM Page xiii
18.4 The Simultaneous-Equation Bias: A Numerical
Example 682
Summary and Conclusions 684
Exercises 684
CHAPTER 19
The Identification Problem 689
19.1 Notations and Definitions 689
19.2 The Identification Problem 692
Underidentification 692
Just, or Exact, Identification 694
Overidentification 697
19.3 Rules for Identification 699
The Order Condition of Identifiability 699
The Rank Condition of Identifiability 700
19.4 A Test of Simultaneity 703
Hausman Specification Test 703
19.5 Tests for Exogeneity 705
Summary and Conclusions 706
Exercises 706
CHAPTER 20
Simultaneous-Equation Methods 711
20.1 Approaches to Estimation 711
20.2 Recursive Models and Ordinary
Least Squares 712
20.3 Estimation of a Just Identified Equation: The
Method of Indirect Least Squares (ILS) 715
An Illustrative Example 715
Properties of ILS Estimators 718
20.4 Estimation of an Overidentified Equation:
The Method of Two-Stage Least Squares
(2SLS) 718
20.5 2SLS: A Numerical Example 721
20.6 Illustrative Examples 724
Summary and Conclusions 730
Exercises 730
Appendix 20A 735
20A.1 Bias in the Indirect Least-Squares
Estimators 735
20A.2 Estimation of Standard Errors of 2SLS
Estimators 736
CHAPTER 21
Time Series Econometrics:
Some Basic Concepts 737
21.1 A Look at Selected U.S. Economic Time
Series 738
Contents xiii
21.2 Key Concepts 739
21.3 Stochastic Processes 740
Stationary Stochastic Processes 740
Nonstationary Stochastic Processes 741
21.4 Unit Root Stochastic Process 744
21.5 Trend Stationary (TS) and Difference
Stationary (DS) Stochastic Processes 745
21.6 Integrated Stochastic Processes 746
Properties of Integrated Series 747
21.7 The Phenomenon of Spurious
Regression 747
21.8 Tests of Stationarity 748
1. Graphical Analysis 749
2. Autocorrelation Function (ACF)
and Correlogram 749
Statistical Significance of Autocorrelation
Coefficients 753
21.9 The Unit Root Test 754
The Augmented Dickey–Fuller (ADF)
Test 757
Testing the Significance of More than One
Coefficient: The F Test 758
The Phillips–Perron (PP) Unit
Root Tests 758
Testing for Structural Changes 758
A Critique of the Unit Root Tests 759
21.10 Transforming Nonstationary Time Series 760
Difference-Stationary Processes 760
Trend-Stationary Processes 761
21.11 Cointegration: Regression of a Unit
Root Time Series on Another Unit Root
Time Series 762
Testing for Cointegration 763
Cointegration and Error Correction
Mechanism (ECM) 764
21.12 Some Economic Applications 765
Summary and Conclusions 768
Exercises 769
CHAPTER 22
Time Series Econometrics:
Forecasting 773
22.1 Approaches to Economic Forecasting 773
Exponential Smoothing Methods 774
Single-Equation Regression Models 774
Simultaneous-Equation Regression
Models 774
ARIMA Models 774
VAR Models 775
guj75772_fm.qxd 05/09/2008 11:15 AM Page xiv

xiv Contents

22.2 AR, MA, and ARIMA Modeling of Time Expected Value 808
Series Data 775 Properties of Expected Values 809
An Autoregressive (AR) Process 775 Variance 810
A Moving Average (MA) Process 776 Properties of Variance 811
An Autoregressive and Moving Average (ARMA) Covariance 811
Process 776 Properties of Covariance 812
An Autoregressive Integrated Moving Correlation Coefficient 812
Average (ARIMA) Process 776 Conditional Expectation and Conditional
22.3 The Box–Jenkins (BJ) Methodology 777 Variance 813
22.4 Identification 778 Properties of Conditional Expectation
22.5 Estimation of the ARIMA Model 782 and Conditional Variance 814
22.6 Diagnostic Checking 782 Higher Moments of Probability
22.7 Forecasting 782 Distributions 815
22.8 Further Aspects of the BJ Methodology 784 A.6 Some Important Theoretical Probability
22.9 Vector Autoregression (VAR) 784 Distributions 816
Estimation or VAR 785 Normal Distribution 816
Forecasting with VAR 786 The χ2 (Chi-Square) Distribution 819
VAR and Causality 787 Student’s t Distribution 820
Some Problems with VAR Modeling 788 The F Distribution 821
An Application of VAR: A VAR Model of the Texas The Bernoulli Binomial Distribution 822
Economy 789 Binomial Distribution 822
22.10 Measuring Volatility in Financial Time Series: The Poisson Distribution 823
The ARCH and GARCH Models 791 A.7 Statistical Inference: Estimation 823
What to Do If ARCH Is Present 795 Point Estimation 823
A Word on the Durbin–Watson d and the ARCH Interval Estimation 824
Effect 796 Methods of Estimation 825
A Note on the GARCH Model 796 Small-Sample Properties 826
22.11 Concluding Examples 796 Large-Sample Properties 828
Summary and Conclusions 798 A.8 Statistical Inference: Hypothesis Testing 831
Exercises 799 The Confidence Interval Approach 832
The Test of Significance Approach 836
References 837
APPENDIX A
A Review of Some Statistical Concepts 801 APPENDIX B
A.1 Summation and Product Operators 801
Rudiments of Matrix Algebra 838
A.2 Sample Space, Sample Points, B.1 Definitions 838
and Events 802 Matrix 838
A.3 Probability and Random Variables 802 Column Vector 838
Probability 802 Row Vector 839
Random Variables 803 Transposition 839
A.4 Probability Density Function (PDF) 803 Submatrix 839
Probability Density Function of a Discrete B.2 Types of Matrices 839
Random Variable 803 Square Matrix 839
Probability Density Function of a Continuous Diagonal Matrix 839
Random Variable 804 Scalar Matrix 840
Joint Probability Density Functions 805 Identity, or Unit, Matrix 840
Marginal Probability Density Function 805 Symmetric Matrix 840
Statistical Independence 806 Null Matrix 840
A.5 Characteristics of Probability Null Vector 840
Distributions 808 Equal Matrices 840
guj75772_fm.qxd 05/09/2008 11:15 AM Page xv

Contents xv

B.3 Matrix Operations 840
Matrix Addition 840
Matrix Subtraction 841
Scalar Multiplication 841
Matrix Multiplication 841
Properties of Matrix Multiplication
Matrix Transposition 843
Matrix Inversion 843
B.4 Determinants 843
Evaluation of a Determinant 844
Properties of Determinants 844
Rank of a Matrix 845
Minor 846
Cofactor 846
B.5 Finding the Inverse of a Square Matrix 847
B.6 Matrix Differentiation 848
References 848
C.9 Prediction Using Multiple Regression: Matrix
Formulation 861
Mean Prediction 861
Variance of Mean Prediction 862
Individual Prediction 862
842 Variance of Individual Prediction 862
C.10 Summary of the Matrix Approach: An
Illustrative Example 863
C.11 Generalized Least Squares (GLS) 867
C.12 Summary and Conclusions 868
Exercises 869
Appendix CA 874
CA.1 Derivation of k Normal or Simultaneous
Equations 874
CA.2 Matrix Derivation of Normal Equations 875
ˆ 875
CA.3 Variance–Covariance Matrix of 
CA.4 BLUE Property of OLS Estimators 875

APPENDIX C APPENDIX D
The Matrix Approach to Linear Regression Statistical Tables 877
Model 849
C.1 The k-Variable Linear Regression APPENDIX E
Model 849 Computer Output of EViews, MINITAB,
C.2 Assumptions of the Classical Linear Excel, and STATA 894
Regression Model in Matrix Notation 851
C.3 OLS Estimation 853 E.1 EViews 894
An Illustration 855 E.2 MINITAB 896
Variance-Covariance Matrix of β̂ 856 E.3 Excel 897
Properties of OLS Vector β̂ 858 E.4 STATA 898
C.4 The Coefficient of Determination R2 in Matrix E.5 Concluding Comments 898
Notation 858 References 899
C.5 The Correlation Matrix 859
C.6 Hypothesis Testing about Individual APPENDIX F
Regression Coefficients in Matrix Economic Data on the World Wide Web 900
Notation 859
C.7 Testing the Overall Significance of
Regression: Analysis of Variance in Matrix Selected Bibliography 902
Notation 860 Name Index 905
C.8 Testing Linear Restrictions: General F Testing
Using Matrix Notation 861 Subject Index 909
guj75772_fm.qxd 05/09/2008 11:15 AM Page xvi

Preface
Objective of the Book
The first edition of Basic Econometrics was published thirty years ago. Over the years,
there have been important developments in the theory and practice of econometrics. In
each of the subsequent editions, I have tried to incorporate the major developments in the
field. The fifth edition continues that tradition.
What has not changed, however, over all these years is my firm belief that econometrics
can be taught to the beginner in an intuitive and informative way without resorting to
matrix algebra, calculus, or statistics beyond the introductory level. Some subject material
is inherently technical. In that case I have put the material in the appropriate appendix or
refer the reader to the appropriate sources. Even then, I have tried to simplify the technical
material so that the reader can get an intuitive understanding of this material.
I am pleasantly surprised not only by the longevity of this book but also by the fact that
the book is widely used not only by students of economics and finance but also by students
and researchers in the fields of politics, international relations, agriculture, and health
sciences. All these students will find the new edition with its expanded topics and concrete
applications very useful. In this edition I have paid even more attention to the relevance and
timeliness of the real data used in the text. In fact, I have added about fifteen new illustra-
tive examples and more than thirty new end-of-chapter exercises. Also, I have updated
the data for about two dozen of the previous edition’s examples and more than twenty
exercises.
Although I am in the eighth decade of my life, I have not lost my love for econometrics,
and I strive to keep up with the major developments in the field. To assist me in this
endeavor, I am now happy to have Dr. Dawn Porter, Assistant Professor of Statistics at the
Marshall School of Business at the University of Southern California in Los Angeles, as
my co-author. Both of us have been deeply involved in bringing the fifth edition of Basic
Econometrics to fruition.

Major Features of the Fifth Edition

Before discussing the specific changes in the various chapters, the following features of the
new edition are worth noting:
1. Practically all of the data used in the illustrative examples have been updated.
2. Several new examples have been added.
3. In several chapters, we have included extended concluding examples that illustrate the
various points made in the text.
4. Concrete computer printouts of several examples are included in the book. Most of these
results are based on EViews (version 6) and STATA (version 10), as well as MINITAB
(version 15).
5. Several new diagrams and graphs are included in various chapters.
6. Several new data-based exercises are included in the various chapters.
7. Small-sized data are included in the book, but large sample data are posted on the book’s
website, thereby minimizing the size of the text. The website will also publish all of the
data used in the book and will be periodically updated.
xvi
guj75772_fm.qxd 05/09/2008 11:15 AM Page xvii

Preface xvii

8. In a few chapters, we have included class exercises in which students are encouraged to
obtain their own data and implement the various techniques discussed in the book. Some
Monte Carlo simulations are also included in the book.

Specific Changes to the Fifth Edition

Some chapter-specific changes are as follows:
1. The assumptions underlying the classical linear regression model (CLRM) introduced
in Chapter 3 now make a careful distinction between fixed regressors (explanatory
variables) and random regressors. We discuss the importance of the distinction.
2. The appendix to Chapter 6 discusses the properties of logarithms, the Box-Cox trans-
formations, and various growth formulas.
3. Chapter 7 now discusses not only the marginal impact of a single regressor on the
dependent variable but also the impacts of simultaneous changes of all the explanatory
variables on the dependent variable. This chapter has also been reorganized in the same
structure as the assumptions from Chapter 3.
4. A comparison of the various tests of heteroscedasticity is given in Chapter 11.
5. There is a new discussion of the impact of structural breaks on autocorrelation in
Chapter 12.
6. New topics included in Chapter 13 are missing data, non-normal error term, and
stochastic, or random, regressors.
7. A non-linear regression model discussed in Chapter 14 has a concrete application of
the Box-Cox transformation.
8. Chapter 15 contains several new examples that illustrate the use of logit and probit
models in various fields.
9. Chapter 16 on panel data regression models has been thoroughly revised and illus-
trated with several applications.
10. An extended discussion of Sims and Granger causality tests is now included in Chap-
ter 17.
11. Stationary and non-stationary time series, as well as some of the problems associated
with various tests of stationarity, are now thoroughly discussed in Chapter 21.
12. Chapter 22 includes a discussion on why taking the first differences of a time series
for the purpose of making it stationary may not be the appropriate strategy in some
situations.
Besides these specific changes, errors and misprints in the previous editions have been cor-
rected and the discussions of several topics in the various chapters have been streamlined.

Organization and Options

The extensive coverage in this edition gives the instructor substantial flexibility in choos-
ing topics that are appropriate to the intended audience. Here are suggestions about how
this book may be used.
One-semester course for the nonspecialist: Appendix A, Chapters 1 through 9, an
overview of Chapters 10, 11, 12 (omitting all the proofs).
One-semester course for economics majors: Appendix A, Chapters 1 through 13.
guj75772_fm.qxd 05/09/2008 11:15 AM Page xviii

xviii Preface

Two-semester course for economics majors: Appendices A, B, C, Chapters 1 to 22.

Chapters 14 and 16 may be covered on an optional basis. Some of the technical appen-
dices may be omitted.
Graduate and postgraduate students and researchers: This book is a handy refer-
ence book on the major themes in econometrics.

Supplements
A comprehensive website contains the following supplementary material:
–Data from the text, as well as additional large set data referenced in the book; the data
will be periodically updated by the authors.
–A Solutions Manual, written by Dawn Porter, providing answers to all of the
questions and problems throughout the text.
–A digital image library containing all of the graphs and figures from the text.
For more information, please go to www.mhhe.com/gujarati5e
guj75772_fm.qxd 05/09/2008 11:15 AM Page xix

Acknowledgments
Since the publication of the first edition of this book in 1978, we have received valuable
advice, comments, criticism, and suggestions from a variety of people. In particular, we
would like to acknowledge the help we have received from Michael McAleer of the
University of Western Australia, Peter Kennedy of Simon Frazer University in Canada,
Kenneth White, of the University of British Columbia, George K. Zestos, of Christopher
Newport University, Virginia, and Paul Offner, of Georgetown University, Washington, D.C.
We are also grateful to several people who have influenced us by their scholarship. We
especially want to thank Arthur Goldberger of the University of Wisconsin, William
Greene of New York University, and the late G. S. Maddala. We continue to be grateful to
the following reviewers who provided valuable insight, criticism, and suggestions for
previous editions of this text: Michael A. Grove at the University of Oregon, Harumi Ito
at Brown University, Han Kim at South Dakota University, Phanindra V. Wunnava at
Middlebury College, and Andrew Paizis of the City University of New York.
Several authors have influenced the writing of this text. In particular, we are grateful to
these authors: Chandan Mukherjee, director of the Centre for Development Studies,
Trivandrum, India; Howard White and Marc Wuyts, both at the Institute of Social Studies
in the Netherlands; Badi H. Baltagi, Texas A&M University; B. Bhaskara Rao, University
of New South Wales, Australia; R. Carter Hill, Louisiana University; William E. Griffiths,
University of New England; George G. Judge, University of California at Berkeley; Marno
Verbeek, Center for Economic Studies, KU Leuven; Jeffrey Wooldridge, Michigan State
University; Kerry Patterson, University of Reading, U.K.; Francis X. Diebold, Wharton
School, University of Pennsylvania; Wojciech W. Charemza and Derek F. Deadman, both of
the University of Leicester, U.K.; and Gary Koop, University of Glasgow.
A number of very valuable comments and suggestions given by reviewers of the fourth
edition have greatly improved this edition. We would like to thank the following:
Valerie Bencivenga Gary Krueger
University of Texas–Austin Macalester College
Andrew Economopoulos Subal Kumbhakar
Ursinus College Binghamton University
Eric Eide Tae-Hwy Lee
Brigham Young University University of California–Riverside
Gary Ferrier Solaiman Miah
University of Arkansas–Fayetteville West Virginia State University
David Garman Fabio Milani
Tufts University University of California–Irvine
David Harris Helen Naughton
Benedictine College University of Oregon
Don Holley Solomon Smith
Boise State University Langston University
George Jakubson Kay Strong
Cornell University Bowling Green State University
Bruce Johnson Derek Tittle
Centre College of Kentucky Georgia Institute of Technology
Duke Kao Tiemen Woutersen
Syracuse University Johns Hopkins University
xix
guj75772_fm.qxd 05/09/2008 11:15 AM Page xx

xx Acknowledgments

We would like to thank students and teachers all over the world who have not only used
this book but have communicated with us about various aspects of the book.
For their behind-the-scenes help at McGraw-Hill, we are grateful to Douglas Reiner,
Noelle Fox, and Anne Hilbert.
Finally, but not least important, Dr. Gujarati would like to thank his daughters, Joan and
Diane, for their constant support and encouragement in the preparation of this and the pre-
vious editions.
Damodar N. Gujarati
Dawn C. Porter
guj75772_intro.qxd 23/08/2008 10:29 AM Page 1

Introduction
I.1 What Is Econometrics?
Literally interpreted, econometrics means “economic measurement.” Although measure-
ment is an important part of econometrics, the scope of econometrics is much broader, as
can be seen from the following quotations:
Econometrics, the result of a certain outlook on the role of economics, consists of the applica-
tion of mathematical statistics to economic data to lend empirical support to the models
constructed by mathematical economics and to obtain numerical results.1

. . . econometrics may be defined as the quantitative analysis of actual economic phenomena

based on the concurrent development of theory and observation, related by appropriate
methods of inference.2

Econometrics may be defined as the social science in which the tools of economic theory,
mathematics, and statistical inference are applied to the analysis of economic phenomena.3

Econometrics is concerned with the empirical determination of economic laws.4

The art of the econometrician consists in finding the set of assumptions that are both suffi-
ciently specific and sufficiently realistic to allow him to take the best possible advantage of the
data available to him.5
Econometricians . . . are a positive help in trying to dispel the poor public image of economics
(quantitative or otherwise) as a subject in which empty boxes are opened by assuming the
existence of can-openers to reveal contents which any ten economists will interpret in
11 ways.6
The method of econometric research aims, essentially, at a conjunction of economic theory
and actual measurements, using the theory and technique of statistical inference as a bridge
pier.7

1
Gerhard Tintner, Methodology of Mathematical Economics and Econometrics, The University of Chicago
Press, Chicago, 1968, p. 74.
2
P. A. Samuelson, T. C. Koopmans, and J. R. N. Stone, “Report of the Evaluative Committee for Econo-
metrica,” Econometrica, vol. 22, no. 2, April 1954, pp. 141–146.
3
Arthur S. Goldberger, Econometric Theory, John Wiley & Sons, New York, 1964, p. 1.
4
H. Theil, Principles of Econometrics, John Wiley & Sons, New York, 1971, p. 1.
5
E. Malinvaud, Statistical Methods of Econometrics, Rand McNally, Chicago, 1966, p. 514.
6
Adrian C. Darnell and J. Lynne Evans, The Limits of Econometrics, Edward Elgar Publishing, Hants,
England, 1990, p. 54.
7
T. Haavelmo, “The Probability Approach in Econometrics,” Supplement to Econometrica, vol. 12,
1944, preface p. iii.

1
guj75772_intro.qxd 23/08/2008 10:29 AM Page 2

2 Basic Econometrics

I.2 Why a Separate Discipline?

As the preceding definitions suggest, econometrics is an amalgam of economic theory,
mathematical economics, economic statistics, and mathematical statistics. Yet the subject
deserves to be studied in its own right for the following reasons.
Economic theory makes statements or hypotheses that are mostly qualitative in nature.
For example, microeconomic theory states that, other things remaining the same, a reduc-
tion in the price of a commodity is expected to increase the quantity demanded of that com-
modity. Thus, economic theory postulates a negative or inverse relationship between the
price and quantity demanded of a commodity. But the theory itself does not provide any
numerical measure of the relationship between the two; that is, it does not tell by how much
the quantity will go up or down as a result of a certain change in the price of the commod-
ity. It is the job of the econometrician to provide such numerical estimates. Stated differ-
ently, econometrics gives empirical content to most economic theory.
The main concern of mathematical economics is to express economic theory in mathe-
matical form (equations) without regard to measurability or empirical verification of the
theory. Econometrics, as noted previously, is mainly interested in the empirical verification
of economic theory. As we shall see, the econometrician often uses the mathematical
equations proposed by the mathematical economist but puts these equations in such a form
that they lend themselves to empirical testing. And this conversion of mathematical into
econometric equations requires a great deal of ingenuity and practical skill.
Economic statistics is mainly concerned with collecting, processing, and presenting
economic data in the form of charts and tables. These are the jobs of the economic statisti-
cian. It is he or she who is primarily responsible for collecting data on gross national
product (GNP), employment, unemployment, prices, and so on. The data thus collected
constitute the raw data for econometric work. But the economic statistician does not go any
further, not being concerned with using the collected data to test economic theories. Of
course, one who does that becomes an econometrician.
Although mathematical statistics provides many tools used in the trade, the econometri-
cian often needs special methods in view of the unique nature of most economic data,
namely, that the data are not generated as the result of a controlled experiment. The econo-
metrician, like the meteorologist, generally depends on data that cannot be controlled
directly. As Spanos correctly observes:
In econometrics the modeler is often faced with observational as opposed to experimental
data. This has two important implications for empirical modeling in econometrics. First, the
modeler is required to master very different skills than those needed for analyzing experimen-
tal data. . . . Second, the separation of the data collector and the data analyst requires the mod-
eler to familiarize himself/herself thoroughly with the nature and structure of data in question.8

I.3 Methodology of Econometrics

How do econometricians proceed in their analysis of an economic problem? That is, what
is their methodology? Although there are several schools of thought on econometric
methodology, we present here the traditional or classical methodology, which still domi-
nates empirical research in economics and other social and behavioral sciences.9

8
Aris Spanos, Probability Theory and Statistical Inference: Econometric Modeling with Observational Data,
Cambridge University Press, United Kingdom, 1999, p. 21.
9
For an enlightening, if advanced, discussion on econometric methodology, see David F. Hendry,
Dynamic Econometrics, Oxford University Press, New York, 1995. See also Aris Spanos, op. cit.
guj75772_intro.qxd 23/08/2008 10:29 AM Page 3

Introduction 3

Broadly speaking, traditional econometric methodology proceeds along the following

lines:
1. Statement of theory or hypothesis.
2. Specification of the mathematical model of the theory.
3. Specification of the statistical, or econometric, model.
4. Obtaining the data.
5. Estimation of the parameters of the econometric model.
6. Hypothesis testing.
7. Forecasting or prediction.
8. Using the model for control or policy purposes.
To illustrate the preceding steps, let us consider the well-known Keynesian theory of
consumption.

1. Statement of Theory or Hypothesis

Keynes stated:
The fundamental psychological law . . . is that men [women] are disposed, as a rule and on
average, to increase their consumption as their income increases, but not as much as the
increase in their income.10
In short, Keynes postulated that the marginal propensity to consume (MPC), the rate of
change of consumption for a unit (say, a dollar) change in income, is greater than zero but
less than 1.

2. Specification of the Mathematical Model of Consumption

Although Keynes postulated a positive relationship between consumption and income,
he did not specify the precise form of the functional relationship between the two. For
simplicity, a mathematical economist might suggest the following form of the Keynesian
consumption function:

Y = β1 + β2 X 0 < β2 < 1 (I.3.1)

where Y = consumption expenditure and X = income, and where β1 and β2 , known as the
parameters of the model, are, respectively, the intercept and slope coefficients.
The slope coefficient β2 measures the MPC. Geometrically, Equation I.3.1 is as shown
in Figure I.1. This equation, which states that consumption is linearly related to income, is
an example of a mathematical model of the relationship between consumption and income
that is called the consumption function in economics. A model is simply a set of mathe-
matical equations. If the model has only one equation, as in the preceding example, it is
called a single-equation model, whereas if it has more than one equation, it is known as a
multiple-equation model (the latter will be considered later in the book).
In Eq. (I.3.1) the variable appearing on the left side of the equality sign is called the
dependent variable and the variable(s) on the right side is called the independent, or
explanatory, variable(s). Thus, in the Keynesian consumption function, Eq. (I.3.1), con-
sumption (expenditure) is the dependent variable and income is the explanatory variable.

10
John Maynard Keynes, The General Theory of Employment, Interest and Money, Harcourt Brace
Jovanovich, New York, 1936, p. 96.
Another random document with
no related content on Scribd:
 Darlington, September 21, 1758.

My very dear Friend,

S URELY it is an age since I had the pleasure of writing to you last.

I was then appointed by Providence to stay at Edinburgh the
race week: since then, I have been at Glasgow, and returned to
Edinburgh again. At both places my health grew better, and I was
enabled to preach always twice, and sometimes thrice a day, to very
large and affected auditories. The partings from both places were
very cutting. In heaven all this will be over. In my way to Newcastle I
preached twice; and thrice in and about that place. Yesterday I hope
some gospel seed fell on good ground at Durham and Bishop-
Aukland. I am now in my way to Yarm, and hope to be next Lord’s-
day at Leeds. God only knows where will be my next remove: I fear
not to glory. I am put out to sea again. If to take some fresh prizes, I
shall rejoice. Lord, what am I! a worthless worm, the chief of
sinners, and less than the least of all saints. And yet what wonders is
God doing day by day! The fields are white ready unto harvest:
nothing is wanting but labourers. Lord Jesus, thrust more out for
thine infinite mercy’s sake! You have had victorious scenes at
London. O that God’s goodness may lead us to a national
repentance! Without this, I fear our rejoicing will only be like the
crackling of a few thorns under a pot. However, God is a prayer-
hearing God. Thousands and tens of thousands, I trust, are
besieging the throne of grace. I am persuaded you are always busy
this way. May you be a prince with God, and prevail more and more!
I hope this will find your whole self, and only daughter, enjoying
thriving souls in healthy bodies. That you may increase in every
respect with all the increase of God, is the earnest prayer of, my
very dear Sir, under innumerable obligations,

Yours, &c. in our glorious Emmanuel,

G. W.
 LETTER MCCXV.
To Mr. S――.

Leeds, October 11, 1758.

H OW is my very dear friend? I hope, prospering in soul and body.

Though absent from, I am often present with him. Ere long we
shall be for ever with the Lord. But preaching does not kill me,
though twice and sometimes thrice a day, for above this fortnight
past. God hath been displaying blessed seasons: thousands and
thousands have attended in various parts. By next Lord’s-day I am to
be at Rotheram and Sheffield. Change of weather will alone drive me
to Winter quarters. Lord, prepare me for Winter trials! they are
preparatives for an eternal Summer. Come, Lord Jesus, come
quickly! We have had a most sorrowful parting this morning. I must
away. Love and gratitude would not suffer me to take horse without
dropping another line. I fear I am troublesome, but you must impute
it to the love and regard due to you from, my very dear friend,

Yours most affectionately in our common Lord,

G. W.
 LETTER MCCXVI.
To the Reverend Mr. G――.

Rotheram, October 15, 1758.

Reverend and very dear Sir,

S INCE my leaving Scotland, in various parts of the north of

England, as at Alnwick, Newcastle, Leeds, &c. the ever-loving,
altogether-lovely Jesus hath manifested forth his glory. Thousands
and thousands have flocked twice, and sometimes thrice a day to
hear the word. Never did I see the fields whiter, or more ripe for a
spiritual harvest. Praise the Lord, O our souls! If the weather
continues fair, I hope to prolong my Summer’s campaign. It shocks
me to think of Winter quarters yet. Lord, help me! How soon does
the year roll round! Lord Jesus, quicken my tardy pace! I suppose
by this time Mr. G―― is got home. Blessed be God for owning him.
I expect to see him in a few days. I write this from the house of a
once terrible persecutor of her husband, but now a Lydia. What a
change doth grace make! As they were in debt at Leeds for their
building, last Lord’s-day I collected for them near fifty pounds. Lord
Jesus, help me to know no party but thine! This I am persuaded is
your catholic spirit. O for an increase of it among all denominations! I
could enlarge, but the people are waiting. I thank God I am not
worse in my health. Help me to cry Grace! grace! I suppose Dr.
W―― hath sent you Miss Prince’s letter. You will remember me to
dear Mrs. G―― and all friends. I send repeated thanks for all
favours, and earnestly entreat the continuance of their prayers in
behalf of, reverend and very dear Sir,

Theirs and yours, &c. in our glorious Head,

G. W.
 LETTER MCCXVII.
To Mr. ――.

London, October 28, 1758.

My very dear Sir,

H OW narrowly did I escape seeing you at Bath! I was coming

from Staffordshire to Bristol, but the change of weather and
shortness of the days drove me up to my Winter quarters. I took
leave of our young friends, who have been publicly on a scaffold
attending a preached gospel. Lord Jesus, increase such mighty
wonders! My health is somewhat improved, but I find a very little
thing soon impairs it. Lord, help me! How very little can I do for
thee! I blush even whilst I am writing. Quicken, O God, my tardy
pace! We hope to see you next week. I wish Mrs. G―― and Mrs.
B―― would come up this Winter. We have had fine gospel seasons.
Grace! grace! I could enlarge, but have scarce got time to write
these few ♦lines. I think they are lines of love and gratitude much
owing you by, my very dear Sir,

Yours, &c. in our glorious Head,

G. W.

♦ “ines” replaced with “lines”

LETTER MCCXVIII.
London, November 3, 1758.
 Dear Sir,

T HOUGH I hope to have the pleasure of seeing you next week,

yet love and gratitude constrain me to send you an answer to
your kind letter. Blessed be God, that you have some spiritual
ministers and people to converse with! I hope that the waters will be
blessed to the recovery of dear Mr. H――’s health, and that out of
his belly will be made to flow rivers of living waters for the
refreshment of many souls. Dear Mr. C――’s sharp affliction I never
heard of till lately: sharp indeed. God make it sweet to his soul! O
these Isaacs! how hard to sacrifice! He hath my unfeigned sympathy,
and worthless prayers. Dear Mr. A――’s sister hath met with such
another trial: she is left with five children. As Mr. A―― hath been a
steady friend, and his brother-in-law was a spiritual child, I have
proposed putting the two eldest boys to boarding for one year.
Twenty pound will do it. Ten guineas are already given. Perhaps Mrs.
B―― or G―― may speak to you about it. I write to each by this
post. Mr. A―― hath taken the children with him into
Gloucestershire. Your kind sisters remembered them. They and your
mother were all here last night. I hope our Lord was with us too.
That is all in all. This must be my Winter Bethel. Without retirement I
cannot go on. Comforts come sweetest from the fountain head. That
you may be filled with them, both here and hereafter, is the earnest
prayer of, my very dear Sir,

Yours, &c. in our common Lord,

G. W.

LETTER MCCXIX.
To Mr. D――.

London, November 13, 1758.

 My dear Mr. D――,

I WAS very glad to receive your kind letter dated August. Blessed be
God that the family is so far reduced, and that I can send you
word a never-failing Providence hath put it into my power to pay off
all Bethesda’s arrears. I know this will gladden your heart, and
strengthen your faith in the Lord God of Bethesda. As yet I hear
nothing of the children. With this you have some bibles and other
books. The Lord Jesus direct me about coming over! I long for an
opportunity. I daily talk of it. But as yet the door seems to be shut.
However, the door for preaching the gospel opens wider and wider.
Neither the new chapel nor the Tabernacle are near big enough. An
awakening as well as comforting influence attends the word, and I
trust such are daily added to the church as shall be saved. I hope if
Mr. Zubly settles in Georgia, you will receive frequent benefit from
his ministry. You do not mention how J―― P―― is disposed of. I
am sensible what a weight must now lie upon you and dear Mrs.
C――. But he is faithful who hath promised, “that as our day is, so
shall our strength be.” I wish you would send me a particular account
of the state of my affairs, and let me know where the children are put
out, how they behave, and whether the colony is in a growing
situation. Grace, mercy, and peace be multiplied upon all! Amen, and
Amen! My wife joins in sending cordial respects. My blessing to the
children. I can but thank you a thousand and a thousand times for all
your labours of love, and praying that great may be your reward in
heaven, I subscribe myself, dear Mr. D――,

Yours, &c. in our glorious Head,

G. W.

LETTER MCCXX.
To Mrs. C――.
 London, November 14, 1758.

Dear Mrs. C――,

I HAVE waited with some degree of impatience for the arrival of Mrs.
B――, with whom, I suppose, you sent your letters. The childrens
passage comes hard upon me: but God’s will be done! Mr. J――n’s
being at Georgia surprizes me. I told Mrs. H――s what she must
expect to meet with. But he is faithful who hath promised, “that all
things shall work together for good to those that love Him.” Blessed
be our God, whose mercy endureth for ever! I am talking every day
of coming over; but how to do it in war time, or how to get the chapel
and Tabernacle supplied, I cannot as yet be clear in. My eyes are
waiting upon him, who hath promised to direct the paths of those
who trust in him. Surely he will richly reward you, who have left your
kindred and native country, and carefully watched over so many
infant lambs in that new world. I can only send you my most grateful
acknowledgments, and pray continually, “that as your day is, so your
strength may be.” Do send me your thoughts about every thing. It
seems by Mr. D――’s catalogue, that several of the children are
almost fit to be put out. I want your opinion of A―― W――. Lord,
help me to bear every thing for thy great name’s sake! I must have
some thorns; for the word seems to run and be glorified in town and
country more and more. Praise the Lord, O our souls! I shall here
break off, hoping that before the ship sails, I shall receive the other
letters, and then more shall be added by, dear Mrs. C――,

Your most obliged friend, and very ready servant in our

common Lord,

G. W.

LETTER MCCXXI.
 To Mrs. C――.

London, November 29, 1758.

Dear Mrs. C――,

L AST night, after having sent away my packet in the morning, I

received your wish’d-for letter dated in August. The others
referred to in that, never came to hand. But I have since sent Mr.
―― word, that my affairs should be continued in the present hands.
I was never so well satisfied before; and I have great pleasure in
thinking, how you will be pleased to hear that Providence hath put it
into my power to pay off all arrears. Methinks I hear you say, Blessed
be the Lord God of Bethesda! Let all my dear family say, Amen! I
find the little ones begin to prattle already; but we must learn to do
good for Christ’s sake. He will rectify all at the great day. O the
happiness of a single eye! As affairs have so turned out for poor
J――y, I am glad you are abroad; and you see how wonderfully God
hath provided for your sister. Be not at all uneasy about your b――r:
he will do better than ever. Blessed is the man that considers the
poor and needy: the Lord shall deliver him in time of trouble. I am
glad the family is lessened.—I think there are some upon the list,
almost ready to be put out. What think you of A―― W―― and
G――? I wish you would write me your sentiments of the children. If
the girls are not wanted in the house, I think the sooner they are put
out the better. But I leave all to those in trust. I am more than
satisfied, and send you ten thousand thousand thanks. Bethesda’s
God will thank you before men and angels. My wife, I believe, hath
written to you. I write this from my Bethel at Tottenham-Court, where
I come for a little retreat. Twelve widows indeed are in their houses
near me, and God is doing wonders at this end of the town. Help me
to praise this wonder-working God, and doubt not of being always
remembered by, dear Mrs. C――,

Your most affectionate, obliged friend, and ready servant in

Christ Jesus,

G. W.
 LETTER MCCXXII.
To Mr. D――.

London, December 5, 1758.

My dear Mr. D――,

N OTWITHSTANDING I wrote to you lately, another opportunity

offers to send you a line. I send you repeated thanks for your
steadiness and care in that house of mercy. With this also come the
things you sent for, except Bishop Hall’s select works, which cannot
be immediately procured. I should be glad if a little rice, indigo, &c.
could be sent, that friends might see some of the Orphan house
produce. Pray be as particular as you can in your account of every
thing. To whom is T―― P―― bound out? I have sent to B――
W――’s father, about sending for him home. If some are not worthy,
others will be. Blessed be God that the arrears will be paid off. You
will see my letter to Mr. P――. The Lord direct me and all how to
act! I hope my old assistants will continue in their places; and I pray
earnestly, that Bethesda may yet take deeper root downwards, and
bear yet abundantly more fruit upwards. Surely the God of the sea
and the God of the dry land will open a door for my embarkation by
and by. Hasten, O Lord, that wish’d-for time! The child lately sent
over, is recommended by Mr. J―― C――. That we all may
continually be recommended to the Father of Mercies, by his dear
and all-prevailing Son Jesus Christ, is the earnest prayer of, dear
Mr. D――,

Yours, &c. in Him,

G. W.
 LETTER MCCXXIII.
To Mrs. C――.

London, March 26, 1759.

Dear Mrs. C――,

I T is now a long time since I heard from Bethesda. The draughts,

God willing, shall be answered. We live in a changing world, and
Bethesda’s God liveth for ever and ever. His word runs and is
glorified daily, especially at Tottenham-Court. Strange! that nobody
will relieve me, that I may once more flee to America. But, heavenly
Father, our times are in thy hands: do with us as seemeth good in
thy sight! O that Bethesda’s little flock may take deep root
downward, and bear fruit upwards! O that you may be helped to lean
on your Beloved! Surely God will bless you for taking care of the
fatherless children. A pepper-corn of acknowledgment, and my poor
prayers, are the only return that I can make you. I am in expectation
of hearing from you every day. That grace, mercy, and peace may be
multiplied upon you all, is the earnest prayer of, my dear Mrs. C――,

Your most affectionate friend and willing servant in our

common Lord,

G. W.

LETTER MCCXXIV.
To Mr. S――.

Bristol, May 25, 1759.

My very dear Sir,

T HIS day se’nnight, through divine goodness, I came hither. The
next day the Spring campaign was opened: on the Lord’s-day
we took the field. Thousands and thousands attended: full as many
as in London. The power of the Lord was present at the three
meetings, as well as at the holy communion. Some cups were made
to run over. Ever since I have been enabled to preach twice, and
sometimes thrice a day. Never did I see the Bristol people more
attentive or impressed. My body feels the heat: but no matter. If
souls are benefited, all is well. Would to God I could begin to do
something for Jesus! You are employed one way, I another. Ere long
we shall sit down together in the kingdom of our Father. Next
Monday perhaps I may move towards Gloucester. I know you will
follow me with your prayers. Mine always attend you and yours. It is
the only return that can be made for all your kindnesses conferred
on, my very dear friend,

Yours most affectionately in our common Lord,

G. W.

LETTER MCCXXV.
To Mr. S――.

Edinburgh, July 3, 1759.

My very dear Friend,

T HERE hath been a long interval between my last and this. My

quick motions, and frequent preaching, have been the causes.
O what am I that I should be employed for Jesus! In Gloucestershire
the cup of many of his people ran over. In Yorkshire I preached for a
week twice a day. Great congregations! great power! Blessed be the
name of the great God for ever and ever! Here also people, high and
low, rich and poor, flock as usual, morning and evening. I am
growing fat: but, as I take it to be a disease, I hope I shall go home
the sooner. Happy they who are safe in harbour. A storm I fear ♦is at
hand. Jesus will be our hiding-place. He shall preserve us in trouble:
he shall compass us about with songs of deliverance. That this may
be the peculiar lot of you and yours, is the earnest prayer of, my very
dear Sir,

Yours, &c. under manifold obligations,

G. W.

♦ “it” replaced with “is”

LETTER MCCXXVI.
To the Reverend Mr. G――.

Edinburgh, July 7, 1759.

Reverend and very dear Sir,

G OD willing, I purpose to see G――; but cannot as yet fix the

day. I preach, and people flock as usual; but Scotland is not
London. The Redeemer is doing wonders there. Every post brings
forth good news. God’s Spirit blows when and where it listeth. O for
a gale before the storm! I expect one is at hand. The refuge is as
near. Jesus is our hiding-place. O for a hiding-place in heaven!
When will my turn come? Some say, not yet; for (would you think it?)
I am growing fat: so did Mr. Darracot a little before he died. O that
my latter end may be like his! You will not forget a worthless but
willing pilgrim. Hearty love to all.

Yours, &c. &c. in the best bonds,

 G. W.

LETTER MCCXXVII.
To the Reverend Mr. T――.

Edinburgh, July 8, 1759.

My very dear Friend,

I DO now begin to despair of seeing you, till we meet in that world,

where spiritual children and spiritual fathers shall join in praising
Him who sitteth upon the throne for ever. O proclaram diem!
Welcome storms which drive us nearer that blessed port. Some
here, I trust, are steering their course that way. Impressions seem to
be lasting on many. In the West, I think, I was rather more attended,
and a greater power accompanied the word. Lord, what am I? On
Monday, or Tuesday at the farthest, God willing, I move. Scotch
importunities have prevailed on me to stay till then. O for some
parting blessings! An ascended Saviour can impart them. I have
good news from the Orphan-house. All is well there. That grace,
mercy, and peace may be multiplied upon you and yours, is the
earnest prayer of, my very dear friend,

Yours most affectionately in our common Lord,

G. W.

LETTER MCCXXVIII.
To the Reverend Mr. T――.
 Edinburgh, July 12, 1759.

My very dear Friend,

I T is well there is a heaven to make amends for all our

disappointments here on earth. I long for a future state, where we
shall all sit down together, and converse for ever without the least
interruption. I know this will find you looking towards, and waiting for
the coming of that day of God. It is a blessed thing to be kept alive in
a dead time. It is a dead time in Scotland indeed. Little or no stirring
among the dry bones. It is not so in London, and several other parts
of England. Lord Jesus, revive thy work in the midst of the years!
You will pray that the fatal languor may not take hold of my already
too languid heart. I would fain be found of my Lord with my loins
girded, and my lamp burning. A storm seems to be at hand. Jesus is
our hiding-place.

Blest is faith that trusts his power,

Blest are saints that wait his hour:

Haste, great Conqueror, bring it near;

Let the glorious close appear.

O that some may be awakened to prepare for that awful hour! On

Monday, God willing, I go to blow the gospel trumpet at Glasgow.
Lord, what am I, that I should be one of thy run-abouts! If this be to
be vile, Lord, make me more vile! Adieu. Hearty love and most
cordial respects await your whole self. Follow me with your prayers,
and as the Lord Jesus enables, they shall be returned by, my very
dear friend,

Yours most affectionately in our common Lord,

G. W.
 LETTER MCCXXIX.
To Mrs. W――.

Glasgow, July 18, 1759.

Dear Mrs. W――,

M AKE no apology for writing your mind. I see the disease, but
know not how to come at a cure. Labourers are wanting of the
old stamp: but vines are very apt to degenerate. If I am not mistaken,
we shall be purged with a witness. God grant it may be that we may
bring forth more fruit. I want the purgation most of all. I dread a
corpulent body. But it breaks in upon me like an armed man. O that
my heart may not wax gross at the same time! I would fain not flag,
but rather begin at least to begin in the latter stages of my road.
Congregations in Scotland are very large. I am glad to hear that the
shout of a king is among you. Pray remember me in the kindest
manner to all in conference, and to all that are so kind as to enquire
after, dear Mrs. W――,

Your sincere friend and servant in our common Lord,

G. W.

LETTER MCCXXX.
To Mrs. C――.

Newcastle, August 16, 1759.

Dear Mrs. C――,

ONG before now I hope you have had the pleasure of seeing
Bethesda’s debts all paid. Bethesda (now outward burdens are

L off) I trust will be more agreeable every day. I do not want to

change its present Governess. This, I fear, would be the case,
was Mr. P―― and his family to come. I fear you would then think
yourself discharged. Besides, he seems to want me to resign my
trust entirely. This all here dissuade me from, upon any terms, or to
any person whatsoever. As you and Mr. D―― are so faithful, if Mr.
P―― will continue to superintend till I come, matters may continue
as they are. O when shall I receive my commission to go abroad.
God only knows what awaits us at home. Jesus is our hiding-place.
I am now in my return from Scotland. For these six weeks last past,
the word hath run and been glorified there. O, who is a God like unto
our God, glorious in holiness, fearful in praises, continually doing
wonders! he will be our God and guide unto death. That he may
continually fill you with his grace here, and grant you an exalted
place, near his throne, in his kingdom hereafter, is the earnest prayer
of, dear Mrs. C――,

Your most affectionate, obliged friend, and ready servant in

our glorious Emmanuel,

G. W.

LETTER MCCXXXI.
Newcastle, August 16, 1759.

My dear Mr. D――,

I HOPE that soon after your writing in February last, my November

letters came to hand, and that Mr. P――l hath been over with
you, to discharge all Bethesda debts. Blessed be God for causing
his work to prosper in your hands. Pray be always as particular as
you can about the children, and set them upon writing often. Mr.
Zubly’s coming to Georgia pleases me much. Pray let me have the
whole account from last audit. I am glad you have taken in three
more orphans; they will turn out great prizes in the last day. Poor Mr.
I――s!—Let him that standeth take heed lest he fall. Lord Jesus,
give us a right understanding in all things! He is an ever-loving and
ever-lovely Jesus. His power hath been made known in Scotland for
these six weeks last past. Some books will be sent from thence to
the care of Mr. Hodsden. The box which I sent in Burkitt some
months ago, I hear was taken;—it had a gown in it, and several other
things. “The Lord hath given, and the Lord hath taken away:
blessed be the name of the Lord!” We have a God that will supply
all our wants, according to the riches of his mercy in Christ Jesus.
O to be faithful unto the death! we shall then receive a crown of life.
That this may be your happy portion, is the earnest prayer of, my
dear Mr. D――,

Yours most affectionately in our common Lord,

G. W.

LETTER MCCXXXII.
To Mrs. C――.

London, August 30, 1759.

Dear Mrs. C――,

T HE bearers of this are well known to Mr. D――n. I trust, I can

recommend them as the followers of Jesus Christ. I wish
Bethesda may be a comfortable asylum for them. I think that Mr.
S――k, for the present, might be employed about the lands round
the orphan-house, and so gradually learn to be overseer at Ephrata.
John H――y, I suppose, will be for moving in a year or two. I wish he
may be capable to do for himself. I am told that he drinks; but I do
not love to catch at ill reports against those that are employed in my
house. Pray let me hear particularly concerning him. Mrs. S――k is
a quiet teachable woman. I think she might be of service to you
immediately, and with her husband do quite well, in a short time, at
the plantation. You will soon be able to judge. If ―― doth not turn
out as you desire, and is not of use in the house, let her be put out to
some good service: she is capable now of doing for herself. Mr.
D――n will be so kind as to take care of the little boy. He is quite an
orphan, and I am told very quiet, and willing to learn. Would to God I
was coming with them. But the way at present is quite blocked up.
Lord Jesus, open it in thy due time! I hope you do not so much as
think of seeing England till I come over. Mrs. S――k hath directions
to leave Bethesda, if you think her coming any reason for your
remove; that would grieve me to the heart. I think myself quite happy
in such an assistant, and hope, now all debts are paid, you will be
free from many burdens. O what hath God wrought? wonders,
wonders! Praise the Lord, O our souls! I should be glad of Mr.
P――l at Bethesda; but I can give him no more power than he hath.
All are against my giving up my trust to any person whatsoever.
Lord Jesus, continue to be Bethesda’s God! Should not H――y’s
daughter be put out to service. Orphan-house plants ought to be
transplanted, to make room for others, and then the family will not be
too large. I commit you, and all, to his never failing mercy, and am,
dear Mrs. C――,

Your most obliged, affectionate friend, and ready servant in

our common Lord,

G. W.

LETTER MCCXXXIII.
To Mrs. C――.
 London, September 12, 1759.

Dear Mrs. C――,

I CAN but send you my poor pepper-corn of thanks unfeigned, for

your continued care of dear Bethesda. Now all is paid, I hope
your best days are to come. Do not entertain a thought of leaving a
place, in which you have your health, and are so useful. If Mr.
S――k can supply Ephrata, then all that family will be gone soon.
Blessed be God that some of the girls turn out so well! The worsted
and stays will be sent with this. I hope to write again soon. I am not
sorry that Lory is like to be disposed of, but I would have another
negroe bought in her room. O that Jesus would wash them in his
blood. Little Reader’s letter pleased us much. I would have all the
boys to write. O that Jesus may convert them! Amen and Amen!
Some of the books coming over, may be dispersed among the
people at Oqueehec, and elsewhere, if not wanted at Bethesda. I
want a master sadly for G――, &c. I trust the Lord will provide.

Blest is faith that trusts His power,

Blest are the saints that wait his hour.

Your sister I hear turns out very well. Would to God I could say so of
all my relations!

But surely God’s rich grace is free;

For, O my God! it found out me.

Hoping to have another speedy opportunity of writing again, with ten

thousand thanks for all your care, and most earnest prayers for your
increasing with all the increase of God, I must hasten to subscribe
myself, dear Mrs. C――,
 Your most affectionate obliged friend, and very ready
servant in our glorious Jesus,

G. W.

LETTER MCCXXXIV.
To Mr. D――.

London, September 13, 1759.

My very dear Mr. D――,

Y OUR letter dated May 25, which I received yesterday by the

hands of Mr. Vincent, gave me unspeakable satisfaction. I can
but thank you, as I do ten thousand times over, for all your care and
faithfulness. He that seeth in secret will ere long reward openly. As I
hear both Dickenson and Ball are arrived, you will have received
more letters from me. God be praised for your success in the silk-
worms! God be praised that Bethesda is out of debt! God be praised
for all his tender mercies to me and mine! Praise the Lord, O our
souls! I wish some of the children could be bred up for the ministry.
G―― seems to me to have some grace. What a pity that I cannot
have a grammar-school! I shall think and pray, and then write to you
and Mr. P――l on this head. You all seem to dislike the temper of
those at Ephrata. If Mr. S――k could supply the place, perhaps it
would be more pleasant. May the Lord Jesus direct, for his name’s
sake! He will, he will! It is a most discouraging thing, that good
places cannot be found for the boys when fit to go out. By this
means, they are kept in the house beyond their time, both to their
own hurt, and to the further expence of the institution. I expect R――
W―― home with Captain Ball. I am glad B―― is at a trade.
Somebody told his mother, that he was gone to his master’s
plantation. I wish he had written a line. Could you let me know what