Econometrics supplies tools to analyze data. These tools are used for two purposes: to answer questions of the form “Does X cause Y?”, and to make predictions. The tools come in two varieties: estimators (OLS, GLS, IV) and statistical tests (t, F, LM). The key to the mastery of these tools is understanding the basic rules of econometrics – the sampling distribution concept. To understand this concept we spend much time visualizing it using Monte Carlo simulations in Stata. In addition, we use the developed tools to estimate economic relationships and to make predictions.
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