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Gary Koop - Analysis of Economic Data

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Gary Koop Analysis of Economic Data
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    Analysis of Economic Data
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Econometrics is concerned with the tasks of developing and applying quantitative or statistical methods to the study and elucidation of economic principles. Analysis of Economic Data teaches methods of data analysis to readers whose primary interest is not in econometrics, statistics or mathematics. It shows how to apply econometric techniques in the context of real-world empirical problems, and adopts a largely non-mathematical approach relying on verbal and graphical intuition. The book covers most of the tools used in modern econometrics research e.g. correlation, regression and extensions for time-series methods and contains extensive use of real data examples and involves readers in hands-on computer work.

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Table of Contents Copyright 2009 John Wiley Sons Ltd The Atrium - photo 1

Table of Contents

Copyright 2009 John Wiley Sons Ltd The Atrium Southern Gate Chichester - photo 2

Copyright 2009 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester,

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Library of Congress Cataloging-in-Publication Data

Koop, Gary.

Analysis of economic data / by Gary Koop.3rd ed.

p. cm.

Includes bibliographical references and index.

ISBN 978-0-470-71389-1 (pbk.)

1. Econometrics. I. Title.

HB141.K644 2009

330.015195dc22

2008049827

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN 978-0-470-71389-1 (PB)

ISBN 978-1-119-95890-1 (epdf)

ISBN 978-1-119-95891-8 (epub)

ISBN 978-1-119-95892-5 (mobi)

To Lise

Preface to the Third Edition

I am happy to say that in the years since the second edition was published, Analysis of Economic Data has continued to be moderately successful. In writing the third edition I have tried to build upon this success. I have made no major changes in style or content in the new edition. This book is still intended to teach the basic tools of the applied economist without involving complicated econometric theory. However, I have made numerous minor changes. More empirical examples have been added (including more empirical project topics) and here and there new important methods have been added (for example, the Johansen test for cointegration has been added to Chapter 11). Most of the changes to the previous edition have arisen out of the realization that, although the book has been used primarily in economics courses, it is also being used in an increasing number of business and finance courses. This has motivated many of the changes and, in particular, the addition of substantial new material on financial volatility (including ARCH and GARCH models).

In the prefaces to previous editions I thanked many people, including students, colleagues, reviewers and all the people at Wiley. I would like to thank them all again for their assistance.

Preface to the Second Edition

When writing the new edition of my book, I tried to take into account the comments of many colleagues who used the first edition, the reviewers (some anonymous) who Wiley persuaded to evaluate my proposal for a new edition as well as my personal experience. With regards to the last, I have used the first edition of the book at three different universities (Edinburgh, Glasgow and Leicester) at three different levels. I have used it for a third-year course (for students who were not specialist economists and had little or no background in statistics), for a second-year course (for students with a fair amount of economics training, but little or no training in statistics) and for a first-year course (for students facing economic data analysis for the first time). Based on student performance and feedback, the book can successfully be used at all these levels. Colleagues have told me that the book has also been used successfully with business students and MBAs.

The second edition has not deleted anything from the first edition (other than minor corrections or typos and editorial changes). However, substantial new material has been added. Some of this is to provide details of the (minimal) mathematical background required for the book. Some of this provides more explanation of key concepts such as index numbers. And some provides more description of data sources. Throughout, I have tried to improve the explanation so that the concepts of economic data analysis can be easily understood. In light of the book's use in business courses, I have also added a bit more material relevant for business students, especially those studying finance.

I still believe in all the comments I made in the preface for the first edition, especially those expressing gratitude to all the people who have helped me by offering perceptive comments. To the list of people I thank in that preface, I would like to add the names Julia Darby, Kristian Skrede Gleditsch and Hilary Lamaison and all my students from the Universities of Edinburgh, Glasgow and Leicester.

Preface to the First Edition

This book aims to teach econometrics to students whose primary interest is not in econometrics. These are the students who simply want to apply econometric techniques sensibly in the context of real-world empirical problems. This book is aimed largely at undergraduates, for whom it can serve either as a stand-alone course in applied data analysis or as an accessible alternative to standard econometric textbooks. However, students in graduate economics and MBA programs requiring a crash-course in the basics of practical econometrics will also benefit from the simplicity of the book and its intuitive bent.

This book grew out of a course I teach at the University of Edinburgh entitled Analysis of Economic Data. Before this course was created, all students were required to take a course in probability and statistics in their first or second year. Students specializing in economics were also required to take an econometrics course in their third or fourth year. However, nonspecialist students (e.g. economics and politics or economics and business students) were not required to take econometrics, with the consequence that they entered their senior undergraduate years, and eventually the job market, with only a basic course in probability and statistics. These students were often ill-prepared to sensibly analyze real economic data. Since this is a key skill for undergraduate projects and dissertations, for graduate school, as well as for most careers open to economists, it was felt that a new course was needed to provide a firm practical foundation in the tools of economic data analysis. There was a general consensus in the department that the following principles should be adhered to in designing the new course:

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