ECN340 – Further Econometrics
Coursework 1
Semester 1, 2022
RUBRIC:
1. This assignment consists of a research-based question. This project is designed to test skills in model
building and statistical reasoning for the choice of the model. In marking this work particular atten-
tion will be paid to the following:
Use of economic reasoning to construct models.
Skill in using computer software, STATA, to analyse the data and perform appropriate regres-
sions, model selection criteria and relevant tests.
Choice of appropriate statistical analyses and refinement of models.
Conclusions and appropriate interpretations of the results.
Overall structure and presentation of the report.
Ability to explain your work.
2. This assignment is worth 45% of the total marks for this module.
3. The pass mark for this module is 40% overall and there is a minimum mark required for every
component of 30%.
4. This assignment must be submitted by 12:00 noon on Monday the 21st of November 2022.
5. Any assignment received after 12:00 noon on Monday the 21st of November 2022 will be deemed
late and subject to the Department’s late submission policy.
6. Any student caught plagiarizing or permitting others to plagiarize their work will receive a mark of
zero on this assignment.
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INSTRUCTIONS:
1. Submit the coursework report through Turnitin on Blackboard.
2. Please ensure that you have read the assessment guidelines provided in the UG Student Handbook,
including late penalties, assessment cover sheets, Turnitin submission requirements, extension re-
quests and extenuating circumstances.
3. The answers must be word-processed. The equations should be typed in using the word equation
editor.
4. The assignment must be electronically submitted (in PDF format via Turnitin) by the above stated
deadline.
5. Number all equations or diagrams that you wish to refer to in your answer. All necessary steps
should be provided.
6. Unless otherwise instructed, all hypothesis tests should be conducted at the 5% significance level.
7. The page limit for the report is of 20 pages of A4 (Arial font, size 12, double spacing, minimum 2cm
margins all around). This includes the text, diagrams & equations. Any material which exceeds this
page limit will not be marked.
8. You must submit your STATA do file along with the typed report.
9. Any change to assessment arrangements will be announced via Blackboard and email.
DATA and data selection for your project:
1. The data set for this project is provided in the excel file named, “UK_monthly macro data.xls”. The
dataset records monthly data for the period 1983-01-01 – 2022-05-01.
2. The “UK_monthly macro data.xls” file contains the following five monthly time series. [Here, ‘1983-
02-01’ refers to the observation recorded for February of the year 1983.]
GDP: Gross Domestic Product (GDP) for the United Kingdom provided in billions Great Britain
Pound Sterling (GBP)
UNEMR: Unemployment rate for the United Kingdom
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T10Y3MM: The difference between 10-year treasury constant maturity and 3-month treasury
constant maturity
EXUSUK: U.S. Dollars to GBP spot exchange rate, U.S. dollars (USD) to one GBP
CPI: Consumer price index of all items in the United Kingdom, Index 2015=100
The time series data for UNEMR and T10Y3MM are measured in terms of percentages.
3. Consider the last two digits of your student registration number. Use the data starting from that
row number in the excel file. The data before this row may be used, as necessary, as initial values
for lags in regressions. For example, if the student registration number ends with number 55, the
student needs to consider data observed from 1987-06-01 to 2022-05-01. The data before June, 1987
date may be used, as necessary, as initial values for lags in regressions.
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Question
Suppose you are employed as a consultant at a research institution for economic affairs. The senior consul-
tant officer has asked you to analyse the above data set to find a suitable time series model for forecasting
GDP for the immediate future 4 time periods (June - September 2022) since the last record available on
the data set. The consultant has further advised you to select appropriate variables found in the data set
(with a minimum of two). You have done some preliminary literature search for the institute by reading
some recent research papers published in respected international journals in macroeconomics related to
this question, and identified that the institution can find the best model for producing accurate forecasts.
You have also been asked to discuss the performance of the forecasts based on your selected model. You
are asked to provide a report which includes:
1. An introduction that motivates the selection of the variables for your analysis based on the existing
literature in macro economics.
2. A Methodology section to provide a description of the data and the details of your strategy to find
the suitable model.
3. An independent econometric analysis section to
(a) provide the suitable model for GDP, and
(b) predict GDP for the period June - September 2022 along with the discussion of forecasting
performance of the model.
4. A conclusion with limitations and recommendations to the research institution for economic affairs.
5. A reference list with a maximum of three papers and a minimum of one paper.
Guidance
The introduction should be based on the 3 references and should be no more than 1 page.
These three academic papers use econometric techniques that are more advanced than multiple re-
gression, so you are not expected to follow their methodology. These papers are useful because of
their conclusions and also because of their introductions which make a compelling case for produc-
ing the report.
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Your econometric analysis should be based on the data extracted using the last two digits of your
student registration number as explained in Point 3 of Page 3.
You need to explain if you transform any of the variables in any way.
You need to explain what your analysis finds and conclude and then give a recommendation to the
institute.
Important graphs and equations (based on STATA) must be included within the report.
Any work cited must be properly referenced using Harvard referencing style. You do not need to
include the textbook or lecture slides in your reference list.
Please have in mind that the purpose is to assess your understanding of advanced econometric
analysis and multiple regression by evaluating how well you can use your knowledge of economet-
rics and statistics to answer a question of practical importance. Thus, the emphasis is on your data
analysis, and how you apply what you have learnt so far, and how you communicate your results.