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  1. Heiss (2016) builds on the popular Introductory Econometrics (Wooldridge, 2016) and demonstrates how to replicate the applications discussed therein using R.↩︎

  2. The R session is initialized by clicking into the widget. This might take a few seconds. Just wait for the indicator next to the button Run to turn green.↩︎

  3. Hint: T and F are alternatives for TRUE and FALSE.↩︎

  4. See Chapter 14 for more on autoregressive processes and time series analysis in general.↩︎

  5. See Chapter 4.4 of the book.↩︎

  6. The package sandwich is a dependency of the package AER, meaning that it is attached automatically if you load AER.↩︎

  7. Appending HiEL * HiSTR to the formula will add HiEL, HiSTR and their interaction as regressors while HiEL:HiSTR only adds the interaction term.↩︎

  8. This is in contrast to the case of a numeric dependent variable where we use the squared errors for assessment of the quality of the prediction.↩︎

  9. See Chapter 13.4 of the book for some example studies that are based on quasi-experiments.↩︎

  10. Also see the box What is the Effect on Employment of the Minimum Wage? in Chapter 13.4 of the book.↩︎

  11. The \(t\)-statistic of the Dickey-Fuller test is computed using homoskedasticity-only standard errors since under the null hypothesis, the usual \(t\)-statistic is robust to conditional heteroskedasticity.↩︎

  12. Note: ur.df() reports two test statistics when there is a drift in the ADF regression. The first of which (the one we are interested in here) is the \(t\)-statistic for the test that the coefficient on the first lag of the series is 0. The second one is the \(t\)-statistic for the hypothesis test that the drift term equals \(0\).↩︎

  13. Although we introduce the ARCH model as a component in an ADL(\(1\),\(1\)) model, it can be used for modelling the conditional zero-mean error term of any time series model.↩︎


Heiss, F. (2016). Using R for Introductory Econometrics. CreateSpace Independent Publishing Platform. Retrieved from

Wooldridge, J. (2016). Introductory Econometrics (Sixth). Cengage Learning.