Econometrics

ECO 625: Milestone Two Guidelines and Rubric

Overview: The final project for this course is designed to guide you through the process of applying the key components of econometrics. In the previous econometrics course (ECO 620), you practiced using regression analysis, which is useful but has some serious limitations and is not appropriate in many settings. As an economist, you will often be asked to analyze data that has serious nonlinearity or is not normally distributed, and you must be able to rise to this challenge. In order to practice the skills involved, you will create a final project in which you will prepare an econometric analysis of a business, policy, or economic issue of your choice, utilizing advanced methods studied in this course (forecasting, nonparametric analysis, maximum likelihood, and so on).

You should choose a topic of personal or professional interest to you. You may revisit the topic you selected in ECO 620 or choose a new topic. A literature review of peer-reviewed publications will be necessary in order to familiarize yourself with possible ways to address the issue empirically, using advanced econometric methods. You will build an empirical model to analyze the issue and use the data to conduct econometric analysis. You will then explain your findings to both technical and nontechnical audiences.

Prompt: Submit a two- to three-page paper that addresses the following questions: What are the quantitative implications and actionable insights of the chosen business, policy, or economic issue? Also, what is the benefit of using advanced econometric techniques relative to simpler ones, such as regression?

Specifically, the following critical elements must be addressed:

I. Data A. What limitations could your data impose on the choice of empirical method? What are the effects of these limitations?

II. Empirical Approach A. What empirical method(s) do you propose and why? Why is this method most appropriate and preferable to simpler models, such as regression? B. What are the limitations of your proposed empirical method? What are possible alternative advanced methods that can be used? Be sure to

address causes for these limitations, such as problems with the data or with interactions between variables. C. What is your model specification? What functional form of data do you use and why?

III. Results and Robustness A. What are your preliminary results from baseline estimations in the statistical software? What is their relationship with the original hypothesis

and research question? Is there a difference between the baseline estimation and the ultimate choice of the model? Discuss. B. Which violations of the chosen model’s assumptions do you anticipate? Which diagnostic tests do you employ to check for presence of

violations of model assumptions? C. What are your secondary results from your test run through the statistical software? Interpret these test results and determine the presence or

absence of problems. D. Are your results affected by the corrections? Are they affected in a significant way (e.g., change of sign of coefficients or change in statistical

significance)?

Rubric Guidelines for Submission: Your submission should be two to three pages in length (not including title page and references) and should use double spacing, 12-point Times New Roman font, one-inch margins, and citations in APA format.

Critical Elements Exemplary (100%) Proficient (90%) Needs Improvement (70%) Not Evident (0%) Value

Data: Limitations Meets “Proficient” criteria and supports discussion with scholarly research

Identifies limitations of the data structure on the choice of empirical methods and details the effects of these limitations

Identifies limitations of the data structure on the choice of empirical methods but does not detail the effects of these limitations, or discussion misses key limitations

Does not identify limitations of the data structure on the choice of empirical methods

10

Empirical Approach: Method

Meets “Proficient” criteria and explains the reasons for the superiority of the chosen method(s) over other methods

Proposes advanced empirical method(s) to use in the study and clearly defends method(s), stating the considerations leading to the choice, including why simpler models were not employed

Proposes advanced empirical method(s) to use in the study and defends these method(s) but does not address considerations leading to the choice, or defense of proposed methods is lacking in detail

Does not propose and defend advanced empirical method(s) to use in the study

10

Empirical Approach: Limitations

Meets “Proficient” criteria and supports discussion with scholarly research

Identifies limitations of the proposed model, delineating between issues with the data and interactions between variables, and addresses the appropriateness of alternative methods/models

Identifies limitations of the proposed model but does not delineate between issues with the data and interactions between variables or does not address the appropriateness of alternative methods/models

Does not identify limitations of the proposed model

10

Empirical Approach: Specification

Meets “Proficient” criteria, and justification is supported through research

Outlines the empirical approach in a clear manner, providing specifications in the form of an equation and justifying the transformation

Outlines the empirical approach but does not provide specifications in the form of an equation or does not justify the transformation

Does not outline the empirical approach

10

Results and Robustness:

Preliminary Results

Meets “Proficient” criteria and discusses any counterintuition in the results or possible inconsistencies

Utilizes statistical software to produce an initial report of results, details those results, and determines the relationship of the results to the hypothesis and research question, disclosing differences in baseline estimation and ultimate choice of model

Utilizes statistical software to produce an initial report of results but does not present those results beyond simple statements of fact or does not determine the relationship of the results to the hypothesis and research question

Does not utilize statistical software to produce an initial report of results

15

Results and Robustness: Violations

Meets “Proficient” criteria, and examination addresses the effects that identified ordinary least squares violations would have on results

Identifies violations and chooses appropriate statistical tests based on initial examination of results

Identifies violations but does not choose appropriate statistical tests to run or employ a complete battery of tests

Misinterprets results of the tests or uses inappropriate tests

15

Results and Robustness:

Secondary Results

Meets “Proficient” criteria, and interpretation is highly specific and detailed

Conducts, interprets, and reports results from secondary tests correctly and determines the presence or absence of problem(s)

Conducts and reports results from secondary tests, but interpretation of test results is limited/incorrect, or the presence/absence of problem(s) is not determined

Does not conduct or report results from secondary tests

15

Results and Robustness: Affected

Meets “Proficient” criteria and provides illustrative examples of impact of changes on overall conclusions

Determines the effects of corrective actions by noting changes (or lack thereof) and the magnitude in coefficients of these changes in statistical significance of key independent variables

Determines the effects of corrective actions but does not note changes (or lack thereof) or does not note the magnitude in coefficients of these changes in statistical significance of key independent variables, or the determination of effects is flawed

Does not determine the effects of corrective actions

10

Articulation of Response

Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy to read format

Submission has no major errors related to citations, grammar, spelling, syntax, or organization

Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas

Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas

5

Earned Total 100%