Econometric methods

Abstract

This chapter seeks to give an understanding behind the econometrics used in the second part of the book. Some of the sections in the chapter are starred indicating that they are more advanced. The econometrics is explained assuming a third year knowledge of the subject, and although the starred sections will require a greater knowledge than that, the reader will not be disadvantaged if they are omitted. Chapter 4 will outline unit root and cointegration theory in the first two sections and the third section will cover the Kalman filtering procedures; finally section four will cover the diagnostic tests used in the following chapters.