The econometric analysis Each topic contains one or more research questions, and as a group you… 1 answer below »

The econometric analysis

Each topic contains one or more research questions, and as a group you have a large degree of freedom on how you answer these research questions. You have choice over which variables are to be in the right hand side of models, which estimator and standard errors to use, and how to structure your arguments. However, you must explain where you began and how you arrived at your preferred model or models. This might include devising a simple theoretical economic model with equations that guide the econometric analysis.

Some general notes you may want to consider:

1. Should the variables enter the specification in levels or logs? Should you add squares? Should there be any interaction terms?

2. Think about all that you have learnt in this course and past econometrics/statistics courses, and how the techniques may help you answer the research question(s).

3. When undertaking the project run multiple models that you believe are decent candidates, and then compare the results.

4. When specifying the model, the goal is to add as much information as possible whilst keeping the model parsimonious.

5. You are not expected to use any estimator that has not been covered in ECON3208/5208. Do not use any method that you do not understand or can’t explain/interpret.

6. Whatever econometric model you use, you must state the assumptions behind the model, and whether you believe they apply in the case you have.

Writing up your analysis

The project must be between 9 to 12 pages. You should use 12 pt fonts and normal margins. In tables, it is acceptable to use smaller fonts but you should not use anything smaller than 10 pts. You should read Chapter 19 of Wooldridge to get insights about how to proceed with an empirical project.

As a guide, you could think of including the following sections (this is merely an example of how to structure the project, you may deviate from it):

1. Introduction (1 page): Discuss previous literature (refer to one or two papers, and broadly describe their main results) and any policy issues and implications.

2. Data (1 page) Describe the variables you chose to include in the model, the number of observations, and justify any decisions you made in selecting the variables. Include basic descriptive statistics.

3. Model (2 pages): You can describe briefly a theoretical model in order to motivate your choice of variables and to help with the interpretation of the results. The model has to be developed on the grounds of the properties of the dependent variable and the available regressors. Then describe the econometric model(s) in some detail. This can also be done in the results section.

4. Results and interpretation (3 pages): This is likely to be the main section in your paper. Describe your econometric models and your results. Interpret the results. Discuss likely problems with the model and possible violations of your main assumptions. Try to say something about the effects of possible biases on your findings. This should also include a careful account of relevant hypothesis tests and their meaning.

5. Diagnostics and Sensitivity analysis (2 pages): This is also a crucial part of your paper. You want to convince the reader that your results are real and not just an artifice of the particular model you are using. Run different models, change some of the decisions you made in manipulating the data and rerun the models. Describe your results and say if they remain true with these changes or if they are sensitive to the exact model/data assumptions you are making. Modelling of real life data is always difficult. It is therefore important that you are able to look critically at your results and are able to identify drawbacks and shortcomings of your findings.

6. Conclusions (0.5 pages): Restate your main results and say how you would expand the paper if you had more time, more data, etc….

7. References (0.5 pages): Reference your textbooks (if you used them) and any article you have read and used as a basis for your discussions and decisions.