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How to Do a Painless Econometrics Project

Econometrics Problems and Excel

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Most economics departments require second or third year undergraduate students to complete an econometrics project and write a paper on their findings. Years later I remember how stressful my project was, so I've decided to write the guide to econometrics term papers that I wish I had when I was a student. I hope that this will prevent you from spending many long nights in front of a computer.

For my econometrics project, I'm going to see if Okun's law holds in America. (If you're class requires you to do a multivariate regression, please see "How to Do a Painless Multivariate Econometrics Project") First we'll need to learn something about Okun's law. The article Instant Econometrics Project - Okun's Law gives us the information we need; you'll need to read through that before we continue. From reading that we see that we want to see how close our data matches:

Yt = 1 - 0.4 Xt

Where:
Yt is the change in the unemployment rate in percentage points.
Xt is the percentage growth rate in real output, as measured by real GNP.

So we will be estimating the model:

Yt = b1 + b2 Xt

Where:
Yt is the change in the unemployment rate in percentage points.
Xt is the change in the percentage growth rate in real output, as measured by real GNP.
b1 and b2 are the parameters we are trying to estimate.

To be able to estimate our parameters, we'll need data. The page Quarterly Economic Data has all the information you need. The easiest thing to do is probably save each of the files individually, following the instructions on the bottom of the screen. Save them in a folder such as "My Documents". Once you've done that, open Excel and load dataquar.xls from the folder you saved it in. If you've done it correctly, you should see something that looks like this.

Now that you've downloaded the data and opened Excel, we can go onto the next section. In the next section we find the data we need.

Be Sure to Continue to Page 2 of "How to Do a Painless Econometrics Project"

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