EC 338 – Economic Forecasting
Rosemary Thomas Cunningham
Spring 2002
COURSE OBJECTIVE:
This course introduces the student to the techniques of forecasting. It will examine how
economic theory and statistical techniques can be utilized to test hypotheses and to forecast
economic phenomena. The course begins with a review of statistics and probability, and
continues to develop the ordinary least squares (OLS) model. It explains how the results
OLS model can be interpreted when some of the model's assumptions are violated and how
the model can be implemented for forecasting purposes.
REQUIRED TEXTS:
Ramu Ramanathan, Introductory Econometrics with Applications, 4th edition, The Dryden
Press, 1998.
Dominick Salvatore, Statistics and Econometrics, 2nd edition, McGraw-Hill, 2002.
REQUIRED READINGS – available through Xanedu.com:
Crossen, Cynthia, “Fright by the numbers: Alarming disease data are frequently flawed,”
Wall Street Journal, Apr 11, 1996.
“Finance and economics: Getting the goat,” The Economist, Feb 20, 1999.
Price, Donald I, “The income redistribution effects of Texas state lottery games,” Public
Finance Review, Jan 2000.
Sterne, Jonathan A C, “Sifting the evidence--what's wrong with significance tests? /
Comment,” British Medical Journal, Jan 27, 2001.
Zeller, Richard A, “On teaching about descriptive statistics in criminal justice: Mean,
variance, and standard deviation,” Journal of Criminal Justice Education, Fall 1999.
COURSE REQUIREMENTS:
Your grade will be based on your performance on 4 problem sets, 2 tests, a
project/presentation, and a comprehensive final exam. Your grade will be determined as
follows:
Problem Sets
15%
Tests
50%
Paper/Presentation 15%
Final
25%
Five problem sets will be distributed throughout the semester but only the four highest
grades will count toward your final grade. Due dates for the problem sets will be announced
in class. The tests will be on February 14 and March 21. The paper/presentation will be an
update and analysis of the models described in the textbook (with accompanying data in
Appendix D). Your topic must be submitted for approval by March 19 and a first draft of
the paper is due on April 9. The paper should be approximately 10 to 12 typed pages; the inclass presentation will be approximately 20 minutes. The presentations will be on April 23
and April 25. All papers are due at the beginning of class on April 30.
I do not accept any assignments by email or fax. All assignments must be handed to me and
the student must keep an electronic copy or a photocopy.
I expect that students will check their email regularly.
Policy on Lateness and Absences
Lateness: Students should make every possible effort to be on time for class. If a student
is late, she should come in quietly and sit as close to the door as possible. She should wait
until the end of class to receive anything that was returned or given out at the beginning of
class. The student is responsible for any missed information.
Absences: Attendance at all class sessions is encouraged. If you do not attend at least twothirds of the classes, you will fail the course. Again, the student is responsible for any missed
information.
Late Assignments: A student is allowed to miss one of the four homework assignments.
If a student misses more than one assignment without an extraordinary reason, her final
grade will be reduced proportionately. The usual penalty for lateness is 1/3 of a letter grade
for every day late. All assignments must be handed to me in person or turned in to the Dean
of the College's office. Days late will be counted from the time it was due until I (or the
Dean's office) receive it, including Saturdays and Sundays.
Missed Tests: Only under extraordinary circumstances should a student miss a scheduled
test. Minor illness does not prevent a student from taking a test. At her earliest
convenience, the student must contact me to explain her absence. At that time, a re-test may
be scheduled and any penalty determined.
Missed Presentations: There is no opportunity to make up a presentation.
Office: Buttrick G30B, Extension 6208
Office Hours: Please make appointments to see me utilizing the New Meeting Request
function in Microsoft Outlook. You can view my available times and request a time that is
mutually convenient. Please don’t make appointments before 9 AM or after 4:30 PM.
Proposed Class Schedule
Week
1
Tuesday
Thursday
Jan 17
Introduction
Central Tendency/Dispersion
R: Chapter 1
S: Chapter 2
2
Jan 22
Probability
R: Chapter 2
S: Chapter 3
3
Jan 24
Binomial and Normal Dist
R: Chapter 2
S: Chapter 3 and 4
Jan 29
EXCEL/SPSS
4
Jan 31
EXCEL/SPSS
Feb 5
Hypothesis Testing
R: Chapter 3
S: Chapter 4 and 5
5
Feb 7
Hypothesis Testing
R: Chapter 3
S: Chapter 4 and 5
Feb 12
Review for Test #1
6
Feb 14
Test #1
Feb 19
OLS Model
R: Chapter 3
S: Chapter 6
7
Feb 21
R-Squared & Hyp Testing
R: Chapter 3
S: Chapter 6
Feb 26
R-Squared & Hyp Testing
R: Chapter 3
S: Chapter 6
8
Feb 28
Forecasting & Causality
R: Chapter 3
S: Chapter 6
Mar 5
Multiple Regression Model
R: Chapter 4
S: Chapter 7
Mar 7
Hypothesis Testing, R-Squared
R: Chapter 4
S: Chapter 7
Mar 12
Spring Break!
9
Mar 14
Spring Break!
Mar 19
Review for Test #2
10
Mar 21
Test #2
Mar 26
Multicollinearity
R: Chapter 5
S: Chapter 9
11
Mar 28
Function Forms
R: Chapter 6
S: Chapter 8
Apr 2
Dummy Variables
R: Chapter 7
S: Chapter 8
Apr 4
Dummy Variables
R: Chapter 7
S: Chapter 8
12
13
14
Apr 9
First Draft of Paper Due
Discussions of Paper/Presentations
Apr 16
Heterosk./Serial Correlation
R: Chapter 9
S: Chapter 9
Apr 23
Presentations
15
Apr 18
Serial Correlation
R: Chapter 9
S: Chapter 9
Apr 25
Presentations
Apr 30
Review for Final
Papers Due
Apr 11
Heteroskedasticity
R: Chapter 8
S: Chapter 9