Econ 439: Spring 2024

Description

This course has an applied econometrics focus. The focus is on forecasting macroeconomic and financial variables. The requirements are three empirical papers. The first, worth 20 percent of the grade, is an extension of an existing article, where some of the results are duplicated and then extended. An example is provided if a student wants to use it. The second, worth 30 percent of the grade, is more of the same but with no example provided. The third, worth 50 percent of the grade, is a more original paper within the range of topics covered in the course, where data are collected and analyzed using whatever econometric techniques are relevant. The aim of the course is to get students doing original empirical research using econometric tools. It is also to prepare students to read empirical papers in economics and finance.

Macroeconomic forecasting concerns forecasting variables like GDP, components of GDP like consumption, investment, and imports, inflation, the unemployment rate, interest rates, the government deficit, and exchange rates. There are various forecasting methods, some purely statistical time series techniques and some using economic theory. We will consider both. Financial forecasting is more problematic, since changes in asset prices may be roughly unpredictable. We will examine topics like momentum forecasting to see if some asset prices are predictable. There will also be some lectures on time series econometrics, which is usually not covered extensively in the core economertrics courses.

Prerequisites

Two semesters of econometrics, like Econ 117 and 123 or Econ 135 and 136, and intermediate macroeconomics. Special permission from the instructor is needed if the student has had only one semester of econometrics.

Attendance

Class attendance is required, and there will be considerable class participation.

Statistical Software

Many students use R, but any software is fine. A package focused on time series econometrics would be ideal, but not necessary. One possibility is the Fair-Parke program: FP Program. Class time will not be taken going over software.

Readings

The main reference for much of the macroeconomics part of the course is The Cowles Commission Approach to Macroeconometric Modeling , August 2023, denoted MM below. Most of the other readings will be journal articles. The following are some of the readings. More readings will be added later.

January 17, 19, 22, 24: Econometric Methodology and Tools

January 29, 31, February 5, 7: Autoregressive (AR) and Vector Autoregressive (VAR) Forecasting; Quasi Ex Ante Forecasting, Nowcasting

First paper due Monday, February 12, before class

February 12, 14, 19, 21, 26, 28: Structural Macro Modeling; Macro Financial Effects

March 4, 6: Reports by Students on the Second Paper

Second paper due Sunday, March 10, at midnight

March 25, 27: Shiller and the Stock Market, Discussion of SP500 Regression

April 1, 3: Momentum Forecasting

April 8, 9: Announcement Effects, Open Economy Macro

April 15, 17: Student presentations of ther lead article

April 22, 24:: Student presentations of the third paper

Third paper due midnight, Thursday, May 2. Dean's excuse needed for an extension.

Data, News Items, Miscellaneous