ECONOMETRIC METHODS II: TIME SERIES SYLLABUS 2014

KRISTOFFER P. NIMARK

Class time and place: Wednesdays and Fridays 9.00-11.00 (20.017) TA sessions: Fridays 12.00-13.00, (Room TBA) Oce hours: Thursdays 12.00 -13.00 Oce 23.408 (Wellington building) Email Address: knimark@crei.cat Course website: www.kris-nimark.net

Overview This course aims at equipping students with the tools needed to produce applied macro economic research. Most of the material can be found in Time Series Analysis by James D. Hamilton (Princeton University Press, 1994), Bayesian Econometrics by Gary Koop (Wiley-Interscience, 2003) and Cochranes text but reading articles may also be required. Administrative matters Grades will be based on the nal exam (60%) and 3 homework assignments (210% + 120%).

Lecture 1 Introduction. What is Time Series Statistics and what is it good for? Philosophical issues related to probability and statistics Why do we need probabilistic models to describe the world? Is there true randomness in nature? Does it matter? Course overview Basics Matrix algebra Stochastic processes Dierence Equations Lag operators Readings: Appendix A4-A5 Ch. 1-2 in Hamilton.
Date : April 1, 2014.
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KRISTOFFER P. NIMARK

Lecture 2-3 Stationary ARMA processes, Prediction and Forecasting. Basics of stochastic processes MA, AR and White Noise Processes Auto Covariance Function Readings: Ch.3 in Hamilton and Ch.3-4 in Cochrane. Conditional expectations Prediction and ARMA processes Interval forecasts Readings: Ch.4 in Hamilton, Ch.3 in Cochrane and lecture notes on the Projection Theorem. Lecture 4 Estimation of Linear Models. Maximum likelihood Least squares Linear projections Readings: Ch.5 and Ch.8 in Hamilton. Lecture 5-7 Vector Auto Regressions (VARS). Estimation Lag specication Hypothesis testing Identication Contemporaneous (Cholesky) restrictions Long-run (Blanchard-Kahn) restrictions Sign restrictions Variance decompositions Impulse response functions Readings: Ch.9-11 in Hamilton and Ch.7 in Cochrane + Articles. Lecture 8 Principal Components and FAVARS. Dimension reduction Dynamic Factor Models Forecasting Readings: Stock and Watson (2010) and Bernanke, Boivin and Eliasz (2005) Lecture 9-10 Unit Roots and Cointegration. Unit roots Cointegration Readings: Ch.18-19 in Hamilton and Ch.11 in Cochrane. Lecture 11-13 State Space Models and the Kalman Filter. Latent variables State Space Models The Kalman Filter Numerical optimization DSGE models Latent Factor models Smoothing

ECONOMETRIC METHODS II

Readings: Ch.5.7 and 13 in Hamilton, lecture notes on the Kalman Filter, Goe et al (1994). Lecture 14 Introduction to Bayesian Statistics. What is Bayesian statistics? Objects of interest: Prior, posterior, marginal likelihood, posterior odds ratio Bayesian Computation Readings: Koop Ch. 1-2 Lecture 15 Linear Regression Model with Natural Priors. Combining natural priors with sample information Model Comparison Monte Carlo integration Readings: Koop Ch. 2-3 Lecture 16 Simulating posterior distributions. Gibbs Sampling Inequality constraints Readings: Koop Ch. 4 Lecture 17 Non-linear models. Metropolis-Hastings Algorithm Model t Readings: Koop Ch. 5 Lecture 18-19 Bayesian estimation of State Space Models. Local level/Unobserved component model DSGE models Prior Predictive Analysis Bayesian Model Averaging Readings: Koop Ch. 8 and 11 and An and Schorfheide (2007) Lecture 20 Course review. References
[1] Cochrane, John, 2005, Time Series for Macroeconomics and Finance, http://faculty.chicagobooth.edu/john.cochrane/research/Papers/Time Series Book.pdf [2] Hamilton, James D., 1994, Time Series Analysis, Princeton University Press. [3] Koop, Gary, 2003, Bayesian Economtrics, Wiley-Interscience.