SOAS University of London

Department of Economics


Module Code:
Taught in:
Term 1

This module provides an introduction to the main methods of econometric analysis and their application. It presents some of the basic methods used in empirical research and enables students to gain practical experience so they are able to carry out good quality empirical work and critically evaluate research results.

The use of formal arguments is kept to a minimum and students are not usually required to prove theorems or derive mathematical results from first principles. The lectures consist of an introduction to econometric methods and the coursework is strongly orientated towards the use of econometric methods in the estimation and testing of economic relationships using real data.

Topics covered include: the classical linear regression model, assumptions about the explanatory variables and disturbances, properties of the least squares estimator, hypothesis tests, dummy variables and their uses, multicollinearity, non-normal disturbances, the characteristics of non-spherical disturbances, heteroscedasticity.

Objectives and learning outcomes of the module

On successful completion of the course, you should be able to;

  • discuss basic econometric concepts including, but not restricted to, deterministic and stochastic, linear regression, sample and population regression functions, disturbance term and disturbances
  • explain the method of ordinary least squares (OLS)write the classical linear regression model in matrix form and use it
  • explain the assumptions of the classical linear regression model
  • derive estimators and discuss their properties
  • demonstrate understanding of measures of goodness of fit including their uses and limitations
  • interpret and critically evaluate econometric results
  • demonstrate understanding of the principles of hypothesis testing and thorough knowledge of statistical distributions their properties and uses
  • explain linear restrictions, implement restricted least squares (RLS) regression and carry out tests of the validity of linear restrictions
  • demonstrate understanding of dummy variables, be able to incorporate them in models and interpret the results
  • explain and use the Chow test
  • demonstrate understanding of multicollinearity: types, consequences, detection and remedies
  • discuss the properties of statistical distributions and use moments to describe the shapes probability density functions
  • explain normality and nonnormality and discuss its consequences, detection and remedies
  • demonstrate understanding of spherical and non-spherical disturbances and heteroscedasticity: its causes, consequences, tests of it and how to make progress in its presence
  • use the course software to implement the econometric methods discussed in the course and demonstrate ability to analyse the output

Method of assessment

Assessment weighting: Exam 100%

Suggested reading

The principal textbook is:

  • Gujarati D N and Porter D C (2009) Basic Econometrics, 5th edition, McGraw-Hill, International Edition ISBN 978-007-127625-2


The following book explains both the econometric theory and how it can be implemented using the course software EViews:

  • Asteriou D and S G Hall (2011) Applied Econometrics, 2nd edition, Palgrave Macmillan, ISBN 978-0-230-27182-1


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