APPLIED SEMINARS IN ECONOMICS

Course Code: Eco-410

Credit Hours: 3 hours
Prerequisites of Course: ECO:501,502,504,505,511,512,513,523
Class: BS 8th

Course Description
There is no textbook for this course. But students are advised to refresh their knowledge of other
courses, especially statistics, econometrics, microeconomics, macroeconomics. In addition, they will
have to search and collect additional reading material and economics data as required. In terms of
efforts this is the most demanding course in the department and students must take it seriously. They
are expected to remain on their toes throughout the semester. The nature of course is such that only
the student with consistent hard work can expect good grades and there are almost no chances of
passing the course solely on the basis of extra work towards the end of the semester.

Course Objectives
The course aims to develop research ability among students at the graduate level. The important
areas that the course emphasizes are reading of research articles, data analysis/estimation and writing
ability.

Learning Outcomes

Students are expected to learn skills in using computer software on econometrics, spreadsheet
analysis and word processing. There will be the bulk of assignments that require estimation of
econometric models. The computer packages which students are able to operate at the end of
semester are as follows.
Econometric analysis: EVIEWS (Other packages can also be used if appropriate)

Spreadsheet analysis: Excel

Word processing: MS WORD

PREPARING AND SUBMITTING ASSIGNED WORK

 All assignments must be submitted in typed form. Students must keep a soft or hard copy of their
assignments for future reference. The marked assignments will not be returned. For any assignment
involving computer work, the computer printouts must be attached with the assignments. All graphs
and charts must be made on the computer using excel or any other package.
 The assignment should be submitted in typed form in double space Time New Roman 12 with a 1.5
margin on the left and 1 margin on right, top and bottom.
 Students are expected to be familiar with the university rules on the use of unfair means in exams
and preparation of assigned work.
 Students must write their full names and program of studies on each assignment. Assignments with
no names will carry zero marks
 Recycled assignments or other material with any paragraph directly copied from others’ work will be
handed over to the department’s disciplinary committee for the necessary action.

DEADLINES
 The last date for the submission of major assignment is Jan 15, 2017. Last dates for the submission
of assignments will be announced in classes.
 Common excuses like the pressure of other exams, sickness or family obligation will not be accepted
under any circumstances.
 Students are advised to adjust their time schedule in anticipation of such events. Late submissions
will be penalized at the rate of 25% marks per day.

TOPICS
Week One to Three

1. Writing Skills and Presentation of Research Material

Assignment 1

On the basis of the latest information in Annual Report, Economic Survey and other data sources,
write essays on the following topics.

Performance of Pakistan economy based on key economic indicators

Size and composition of federal government’s deficit in Pakistan

Pakistan’s balance of payments and its composition

Pakistan’s internal and external debt: current situation and future prospects

Inflation, unemployment, poverty and inequality

Length: Equivalent of 5 typed pages for each essay

Week Four to Six

 2. Descriptive Statistical Analysis (Averages, Growth, Trend, Correlation, Inequality)

Assignment 2
a) Taking data from Economic Survey, construct sector wise series of GDP at current market prices
as well as at constant market prices for the period 1959-60 to 2012-13. Derive the series of price
deflators for each of these economic aggregates.
b) For each year find 5-year rolling arithmetic means, standard deviations and compound growth
rates of GDP of each sector at constant market prices. Plot the information in a graph as line charts
and comment on the trends.
c) Using data on GDP at constant prices (Y), GDP deflator (P) and money supply (M) for the period
1959-60 to 2012-13, derive the series of income velocity of money (V). Construct series of annual
growth rates of Y, P, M and V, present the information in a graph and interpret.
d) Test the null hypotheses, one at a time, that the average growth rate of each variable is statistically
different from the other.
e) Collect daily data on exchange rates of Pak rupees with 12 major currencies that are important for
Pakistan (including US dollar, Canadian dollar, Australian dollar, Japanese Yen, UK Pound, Saudi
Riyal, Euro) for the past one year. Find one-month (non-rolling) compound growth rates of the
exchange rates. Present the results in table and comment on your findings.

Week Seven to Eight

3. OLS Estimation, Specification, Autocorrelation, Heteroscedasticity and Multicollinearity

Assignment 3
a) Using the data set Annual, calculate the growth rates of nominal GDP, real GDP and price level for
each quarter alternatively with intervals of i) one quarter, ii) four quarters and iii) 12 quarters. Prove
mathematically that if the growth rates of nominal GDP, real GDP and price level are denoted by g1,
g2 and g3 respectively then 1+g1 = (1+g2)(1+g3) and g1  g2 + g3. Verify this relationship with
your calculation. In which of the three cases (i, ii and iii) does the approximation hold best?
b) Taking the relevant data from the set Annual estimate an appropriate equation to determine the
following (one at a time). In your choice take care of functional form, autocorrelation and
multicollinearity. Interpret economic content in your regression results
Exports, imports, trade deficit

Customs, excise, sales tax (domestic), sales tax (imports), income tax

Private investment and public investment (Gross fixed capital formation)

c) Using the data set Manufacturing, construct Price and quantity indexes of energy input.
d) Using the data in the set ‘Manufacturing’, and part c above, estimate Cobb-Douglas
production function and Cobb-Douglas cost function using capital, labor and energy as the
factor inputs. From both the estimated functions test the null hypothesis that the technology
exhibits constant returns to scale. Interpret your results.
 e) Using the data set Household, estimate cubic Engle equations for all the commodity groups. Test and
remove heteroscedasticity from your estimates. Test the null hypothesis that the marginal budget
shares are linear functions of total income. Estimate expenditure elasticities at sample means.
Interpret all your results using your knowledge of consumer theory.

Week Nine to Ten

4. Univariate Time Series Analysis: Stationarity, ARMA Models, ARCH Models

Assignment 4

a) Using the data set Quarterly, apply ADF tests on the logs of all the variables and determine their
orders of integration.
b) Using the same indices as in 4(a), diagnose, estimate and interpret ARMA models and forecast the
variables for the future 8 periods.
c) Diagnose and estimate ARMA models keeping the last 8 observations out of the sample range.
Interpret your results.
d) Using the estimated ARMA models in part c, make 8-quarters forecasts for all the variables; analyze
and decompose the forecasting errors; and interpret your results.
e) Using the indices as in 4(a), diagnose and estimate GARCH models. Interpret your results.
f) Using the indices as in 4(a), diagnose and estimate ARCH-M models. Interpret results.

Week Eleven to Twelve

5. Time Series Analysis: VAR models, Causality, Co-integration

Assignment 5

a) Using the data set Annual, estimate VAR model in i) GDP and Consumption, ii) GDP and Money
Supply and iii) GDP, Consumption and Money Supply. Draw and interpret impulse response
functions for each of the three VAR models.
b) Using the data set Annual, determine the nature of Granger causality under alternative lag lengths
between i) GDP and Consumption, ii) GDP and Money Supply and iii) GDP, Consumption and
Money Supply. Interpret your results.
c) Using the data set Annual, apply co-integration analysis for i) GDP and Consumption, ii) GDP and
Money Supply and iii) GDP, Consumption and Money Supply. Interpret your results.
d) Using the data set Annual, apply co-integration analysis between the nominal exchange rate of
Pakistan Rupee against US dollar and the relative CPI of Pakistan against the CPI of USA. Interpret
your results.
 Week Thirteen to Fourteen

6. Equations Systems: Production Analysis

Assignment 6

a) Using the set Manufacturing, estimate Cobb-Douglas cost system using capital, labor and energy as
the three inputs and test the hypotheses one by one.
i) Energy is a redundant input
ii) Technology is subject to constant returns to scale.
b) Estimate all Hicks and Allen elasticities at the sample means.
c) Estimate Translog cost system using capital, labor and energy as the three inputs and test the
following hypotheses, one at a time.
i) Technology is homothetic
ii) The underlying production function is homogeneous
iii) The underlying production function is homogeneous of degree one
iv) The underlying production function is Cobb-Douglas
d) Estimate all Hicks and Allen elasticities at the sample means.
e) Estimate any flexible system of cost function and input demand functions other than Translog and
repeat all the problems in part c.

Week Fifteen

7. Equations Systems: Household Demand Analysis

Assignment 7

a) Using the set Demand, estimate linear expenditure system.

b) Estimate all the income and price elasticities of demand at the sample means.
c) Estimate linear AIDS.
d) Estimate all the income and price elasticities of demand at the sample means.

Week Sixteen

8. Models of Panel Data

Assignment 8

Using the data set Panel Country, perform the following tasks.
 a) Using the data set Panel Country, construct panel of all the countries and estimate Cobb-Douglas
production function with FEM and REM. Apply Hausman’s test to choose between the two models.
Interpret the results of the chosen model.
b) Introduce lagged output in your model and using the data set Dynamic Panel Country, estimate the
Dynamic Panel Data Model by GMM using appropriate instruments.

Week Seventeen and Eighteen

Presentation