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As part of the course requirements you have to undertake an econometric
evaluation of an economic issue using data that you have gathered either

from the host of data sets now available on the web, or that you have

assembled yourself from data published in journals or in official sources. The

data set must contain a minimum of 3 variables, (one dependent variable

and at least 2 right hand side variables to be added to a constant term). You

should concentrate on estimating a multiple (rather than simple) regression


The model should be a causal one, (ie the right hand side variables should

explain the dependent variable, not the other way round). This also means, for

example, that you should not estimate a national accounts model of the form

Y=C+I+G+(X-M). This is an accounting identity and so the coefficients

shouldn’t be anything other than one, barring measurement error).

The econometric results should include a thorough statistical evaluation using

the full range of (relevant) diagnostic tests highlighted during the course. Do

not use tests just for the sake of it. There are no marks to be gained by doing

countless irrelevant tests. Only use tests that are relevant to the type of data

and economic relationship you are trying to estimate.

In order for the project to be marked at all, you must provide a disk containing

i) the data you have used ii) the Stata output log containing your regression

output and iii) a copy of the project on disc along with a hard copy of the


You should aim for a maximum of 2,500 words or around 8 pages of text, 2

to 3 tables of results and 2 or 3 figures (not including the log file)

Please provide a word count on your cover page.

Project Objectives

The idea is to choose an economic issue which you find interesting, outline a

theory and a set of testable hypotheses that follow on from that. Then test the

theory empirically using the tools you have learned during this term’s course.

The dissertation should read something like a typical article that you would

find in a (non-technical) academic journal like the Journal of Economic

Perspectives, (the collection of back issues is in the library).

Choosing a Topic

The most important thing is to choose a project that is feasible, that can be

finished within one month from start to finish and still allow you time to work

on your other subjects. This means confining your topic to a simple issue.

Also it is a good idea to choose a topic that you are interested in, rather than

one you fell you ought to do. The more you are interested the easier the

project will be. Do not write the theoretical part of your project until you know

you have data that can be used to test your hypotheses.

One good way to find a topic to study is to read the economic pages of the

broadsheet newspapers and/or academic articles summarised in overview

journals like the

Journal of Economic Perspectives


Journal of Economic Literature

both of which are in the library. In addition there are specialist journals, (and

therefore more technical), such as the

American Economic Review, Economic Journal, Quarterly Journal of

Economics, Journal of Labor Economics, Journal of Industrial

Economics, Journal of Development Economics, Journal of Finance

which should all be good sources of current issues concerning academic



There are now a variety of data sources on the internet.

Many UK macroeconomic statistics, (inflation, unemployment, gdp etc), can

be downloaded from the Office for National Statistics website

The bized site also contains access to official UK data alongside company

account data and some international data.

You can find stock market data at the Stock Exchange’s web site

or from yahoo

A very good source of international data both cross section and time series is

given at the Resources for Economists website

and also the Statlib website

and also the university of Michigan

The World Bank also has data

and there are lots of data and ideas at and

The library also has a useful link to some sites

For those of you interested in working with cross section data. I have put 2

different cross section data sets on the course web site

GHS_project.dta – which has information on wages, health, smoking,

drinking, education and other socio-demographic characteristics of individuals

taken from the General Household Survey

(you can find a codebook giving details of the variables at )

Food_project.dta – which has information on household spending on various

consumer items taken from the Expenditure & Food Survey

(you can find a codebook giving details of the variables at )

You will of course have to choose which variables to model and give

economic reasons for your choice.

These are just guides to help you. You may, of course, find your own data.


Ideally your project should look and be structured like an article you can find

in any of the economic journals listed above.

So your project should include the following sections:

Theoretical Framework

Set out the economic theory underlying your project and use it to specify a

model and the resulting hypotheses to be tested. Set out your prior

expectations of the likely signs and magnitudes of the coefficients. Discuss

any econometric problems you expect to encounter.


Discuss the sources for your data. Give the exact definition of variables (in a

Table in an appendix) and sample period, Describe the main features of the

data using a table of sample means and their standard errors. Graph the

trends in the dependent and, perhaps, the independent variables. Comment

on the main trends/features.

Econometric Method

Outline the econometric techniques used to estimate your model, (eg.

ordinary least squares with corrections for heteroskedasticty/autocorrelation).

You need to convince the reader that you have made the right choice of

estimation technique. Evaluate the model using the set of (relevant)

diagnostic tests covered in the lectures. (Eg, Box-Cox, Ramsey Reset,

Forecasting). Do NOT report the results of the tests one after another like a

shopping list. Report the tests for each model at the bottom of a column of

estimates. (Again read a journal article for hints on presentation).


Outline your results in tabular form, (check with a journal if you are unsure as

to how to present your results). The Stata command “outreg” will help

considerably with you inputting the results in tabular form. State whether your

hypotheses are accepted or rejected. Comment on the results and on any

diagnostic tests you have used.


Give an overview of your hypotheses and main results


Always list the data sources and articles that you may have read at the end of

the discussion. Tables and Figures should come after the references


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