This document introduces an introductory econometrics course. It discusses the goals of the course, which are to provide students with an understanding of why econometrics is necessary and basic econometric tools to estimate and analyze economic relationships using real data. It defines econometrics as the use of statistical methods to test economic theories and evaluate policies using data. The document outlines the methodology of econometrics, including formulating models based on theory, obtaining data, estimating parameters, testing hypotheses, and forecasting or making policy decisions. It also discusses different types of data used in econometrics, including cross-sectional, time series, pooled cross-sections, and panel data.

1. EE325 Introductory Econometrics 1
Welcome to EE325
Introductory Econometrics
Introduction
Why study Econometrics?
What is Econometrics?
Methodology of Econometrics

2. EE325 Introductory Econometrics2
Course Goals
To provide students an understanding of why econometrics is
necessary and a working ability with basic econometric tools
such that:
 Students can apply basic econometric tools to estimation,
inference, and forecasting in the context of real world
economic problems
 Students understand how to process information from a
sample of economic data
 Students can read critically the results and conclusions
 Students have a foundation for further study of advance
econometrics.

3. EE325 Introductory Econometrics3
Why study Econometrics
 A gap exists between what you have learned
as an economics student and what economists
actually do
 Most economists engage in economic analysis
(empirical: use economic data to estimate
economic relationships, test economic
hypotheses, and predict economic outcome)
 Studying Econometrics fills this gap

4. EE325 Introductory Econometrics4
What is Econometrics?
 “ Econometric is based upon the development
of statistical methods for estimating economic
relationship, testing economic theories, and
evaluating and implementing government and
business policy” (wooldridge p. 1)
 Econometrics is concerned with using data to
test a theory or to estimate a relationship—
empirical economic analysis.

5. EE325 Introductory Econometrics5
What is Econometrics?
The study of Econometrics:
 Estimation of economic relationship
 Testing of hypotheses about
economic theory
 Forecasting

6. EE325 Introductory Econometrics6
What is Econometrics?
 Econometrics has evolved as a separate discipline
from statistics because
- Rare in economics (and many other areas without
labs!) to have experimental data. Econometrics
focuses on the problems inherent collecting and
analyzing nonexperimental, or observational, data
- Economists have developed new techniques to deal
with the complexities of economic data and to test
the predictions of economic theories

7. EE325 Introductory Econometrics7
Methodology of Econometrics
Steps in Empirical Economic Analysis
1. Formulation of the question of interest, statement
of theory or hypothesis
2. Formulating a model (based on economic theory,
past experience or intuition, other studies):
-specification of the mathematical model of theory
-specification of the statistical, or econometric
model

8. EE325 Introductory Econometrics8
Methodology of Econometrics
3. Obtaining the data
4. Estimation of the parameters of the
econometric model
5. Hypothesis testing
6. Forecasting or prediction
7. Policy decision

9. EE325 Introductory Econometrics9
Types of Data – Cross Sectional
 Cross-sectional data: Data collected over sample
units in a particular time period
 Consists of a sample of individuals, households,
firms, cities, states, countries, or a variety of other
units, taken at a given point in time.
for example: income by province in Thailand during
2006. (How many observation do we have?)
 Often obtained by random sampling from the
underlying population

10. EE325 Introductory Econometrics10
Types of Data – Time Series
 Time series data: data collected over discrete
intervals of time (observations on variable(s) over
time)
 Time series data has a separate observation for
each time period – e.g. annual gross domestic
product of Thailand from 1980-2005
 Since not a random sample, different problems to
consider
 Trends and seasonality will be important

11. EE325 Introductory Econometrics11
Types of Data – Pooled
cross sections & Panel
 Can pool random cross sections and treat
similar to a normal cross section – known
as pooled cross section data. Will just
need to account for time differences.
 Can follow the same random individual
observations over time – known as panel
data or longitudinal data. (consists of
time series for each cross-sectional
member in the data set)