Econometrics

TIris book is intendedfor afirst year graduate course in econometrics. However, the first six chapters have no matrixalgebra and can be used in an advanced undergraduate class. This can be supplemented by some ofthe material in later chapters that do not require matrix algebra, like the first part ofChapter lIon simultaneous equations and Chapter 14 on time-series analysis. This book teaches some of the basic econometric methods and the underlying assumptions behind them. Estimation, hypotheses testing andprediction are three recurrent themes in this book. Some uses ofeconometric methods include (i) empirical testing ofeconomic theory, whether it is the permanent income consumption theory orpurchasingpower parity, (ii) forecasting, whether it is GNP or unemployment in the U.S. economy or future sales inthe computer industry. (iii) Estimation ofprice elasticities ofdemand, or returns to scale in production. More importantly, econometric methods can be used to simulate the effect ofpolicy changes like a tax increase on gasoline consumption, or a ban on advertising on cigarette consumption.