Econometrics II

Definition, Simple Regression Model with Dummy variable, interaction dummy, comparing two regressions(Chow test), Models with Dummy Dependent Variable- Linear Probability Model, Logit Model, Probit Model, Comparison between Logit and Probit Models, problem of disproportionate sampling, Measuring goodness of fit- Effron’s R2 and McFadden’s Pseudo R2, Examining the overall significance of regression.

Definition and Specification, Geometric Lag Approach, Estimation of Geometric Lag Model- The Koyck Method, Adaptive Expectations Model, Partial Adjustment Model, Almon’s Polynomial Lag Model.

Definition, usefulness and types, Panel Data Models- Constant Coefficients Model, Fixed-Effects Model, Random Effects Model, The Hausman Test.

Important concepts- stochastic process, stationary stochastic process, white noise stochastic process, random walk(with and without drift), unit root stochastic process, Tests for stationarity- Graphical approach, Autocorrelation function and Correlogram, Unit root test, Dickey-Fuller test, Augmented Dickey-Fuller test, Phillips-Perron test, Sources of non-stationarity, limitations of unit root test, Spurious regression problem. Cointegration and Error Correction Mechanism- Engle-Granger cointegration test and ECM, ARIMA Forecasting- Box-Jenkins Methodology, Vector Autoregressive Model- Specification, estimation, forecasting, Vector Error Correction Model, merits and demerits of VAR Causality tests- Granger Causality test and Sims Causality test ARCH Model and GARCH model

Meaning, features and examples, OLS estimation ignoring simultaneity, Structural and reduced form equations, Identification problem- Rules and application, Estimation of Simultaneous Equations System- Indirect Least Squares and Two-Stage Least Squares.