Econometrics –II

Paper Code: 
ECO 414
Credits: 
4
Contact Hours: 
60.00
Max. Marks: 
100.00
Objective: 

1.      To understand the meaning, reasons and consequences of the violation of assumptions of the regression model.

2.      To acquaint the students with the detection and remedial methods of multicollinearity, heteroscedasticity and autocorrelation. 

3.      To appraise the students with the estimation and interpretation of models with dummy independent variables.

12.00
Unit I: 
Multicollinearity

Meaning, reasons, consequences, detection and remedies of the problem of multicolliearity.

12.00
Unit II: 
Heteroscedasticity

Meaning, reasons, consequences, detection ( graphical method and B-P-G test) and remedies (weighted least squares method, root transformation and log transformation) of the problem of heteroscedasticity.   

12.00
Unit III: 
Serial correlation

Meaning, reasons, consequences, detection (graphical method and D-W test) and remedies ( generalized difference equations and Prais-Winsten transformation) of the problem of serial correlation.

12.00
Unit IV: 
Specification error

Meaning of model specification, Specification error- omission of a relevant variable; inclusion of irrelevant variable; errors of measurement, tests of specification errors.

12.00
Unit V: 
Qualitative (dummy) independent variables

Nature of dummy variables; ANOVA and ANCOVA models; caution in the use of dummy variable-the dummy variable trap; the dummy variable alternative to the chow test; Interaction effects using dummy variables.

Essential Readings: 

1.      Gujarati, D.N. and Porter, D.C., Essentials of Econometrics, McGraw

      Hill,4th Edition, 2010.

2.      Dougherty, C.,Introduction to Econometrics, Oxford University

Press, 5th Edition, 2016.

3.      Koutsoyiannis, A., Theory of Econometric, Palgrave Macmillan, 2nd Edition, 2001.

References: 

1.      Klein, L. R. , An Introduction to Econometrics, Printice-Hall, Englewood     Cliffs, NJ, 1962.

2.      Walters, A. A., An Introduction to Econometrics., Macmillan, 1968.

Smith, A. and Taylor, J. Edward Essentials of Applied Econometrics, University of California Press, 2017.

3.      Kmenta, J.,  Elements of Econometrics, Indian Reprint, Khosla Publishing

      House, 2nd Edition, 1997.

Academic Session: