# «1. EVIEWS: INTRODUCTION This tutorial will introduce you to a statistical and econometric software package called EViews, or Econometric Views. ...»

EViews 3.1 Tutorial

by Manfred W. Keil

to Accompany

Introduction to Econometrics

by James H. Stock and Mark W. Watson

1. EVIEWS: INTRODUCTION

This tutorial will introduce you to a statistical and econometric software package called EViews, or

Econometric Views. EViews runs on both the Windows (9x, Me, NT 4.0 or 2000) and Macintosh

platforms. It is produced by Quantitative Micro Software (QMS) in Irvine, California. You can read

about various product information at the firm’s Web site, www.eviews.com. The program comes with two manuals, a User’s Guide and a Command and Programming Reference. Both manuals can be ordered separately ($40 each, $75 for the pair) by calling (949) 856-3368 or writing to sales@eviews.com. The User’s Guide is better for first-time users. There is also a cheaper student version (EViews 3.1 Student Version for Windows 9x, 2000, NT 4.0, $39.95) and EViews Basics available. The difference between the student version and the full version is in the limitation on the size of data sets (“capacity limitation” is 1,000 observations for each series and no more than 10,000 observations for all series) and the availability of some estimation methods such as ARCH (discussed in Chapter 14), GMM, SURE, FIML, 3SLS, FIML and TSLS system estimators (don’t worry what these estimation methods stand for at this point), as well as some of the estimators discussed in the appendix to Chapter 9. Furthermore, and perhaps most importantly for you right now, the student version does not allow you to run EViews in “batch mode.” This tutorial will explain the difference between interactive use and batch mode below. Once you have gone through the first series of commands in interactive, you will almost certainly run programs in batch mode.1 Econometrics deals with three types of data: cross-sectional data, time series data, and panel data, or longitudinal data (see Chapter 1 of the textbook). In a time series you observe the behavior of a single entity over multiple time periods. This can range from high frequency data such as financial data (hours, days); to data observed at somewhat lower (monthly) frequencies, such as industrial production rates and inflation and unemployment rates; to quarterly data (GDP) All results in this tutorial were computed using EViews 3.1. This was done to allow the tutorial to be used by students who either have bought the EViews 3.1 Student Version and/or use EViews in labs/networks that have not upgraded from the previous version. Some of the features missing from Version 3.1 are the DF-GLS test discussed in Chapter 14 and some statistical features, such as computing summary statistics by quantiles (see, for example, Table 4.1).

or annual (historical) data. In a cross-section you analyze data from multiple entities at a single point in time. One big difference between time series and cross-sectional analysis is that the order of the observation numbers does not matter in cross-sections. With time series, you would lose some of the most interesting features if you shuffled the observations. Finally, panel data can be viewed as a combination of time series and cross-sectional data, since multiple entities are observed at multiple time periods. EViews allows you to work with all three types of data.

EViews is the most commonly used econometrics package for time series analysis in academics, business, and government. It can also be used for cross-section and panel data. EViews allows you to save results within a program and to “retrieve” these results for further calculations.

Remember how you calculated confidence intervals in statistics, say for a population mean?

Basically you needed the sample mean, the standard deviation, and some value from a statistical table. In EViews you can calculate the mean and standard deviation of a sample and then temporarily “store” these. You then work with these numbers in a standard formula for confidence intervals. In addition, EViews provides the required numbers from the relevant distribution (normal, χ 2, F, etc.).

While EViews is truly interactive, you can also run a program as a “batch” job, i.e., you write a sequence of commands and then execute the program in one go. In the good old days the equivalent was to submit a “batch” of cards, each containing a single command, to a technician, who would use a card reader to enter these into the computer, and the computer would execute the sequence of statements. While you will work at first in interactive mode by clicking on buttons, you will very soon discover the advantage of running your regressions in batch mode. This method allows you to see the history of commands, and you can also analyze where exactly things went wrong if there are problems with any of your commands. This tutorial will initially explain the interactive use of EViews, since it is more intuitive. However, we will switch as soon as it makes sense into the batch mode.

EViews is not particularly good at graphing; actually, the graphs look a bit unprofessional. If you need to graph data, it is best to save it in a spreadsheet or ASCII format, which EViews allows you to do, and then to import the data into Excel (or another spreadsheet program you prefer). Even better, since EViews works in a Windows format, it allows you to cut and paste the data into any other Windows-based program.

Finally, there is a warning about the limitations of this tutorial. The purpose is to help you gain an initial understanding of how to work with EViews. I hope that the tutorial looks less daunting than the manuals. However, it cannot replace the accompanying manuals, which you will have to consult for more detailed questions (alternatively use “Help” in the program). Feel free to provide me with feedback of how we can improve the tutorial for future generations of students (manfred.keil@claremontmckenna.edu).

2. CROSS-SECTIONAL DATA Interactive Use Let’s get started. Click on the EViews icon to begin your session. What you see next is the EViews window, with the title bar at the top, the command window immediately below and the status line at the very bottom.

(Your command window may appear smaller, but you can enlarge it using the usual windows methods.) The results of your various operations will be displayed between the command window and the status line in the so-called work area. In interactive use, EViews allows you to execute commands either by clicking on command buttons or by typing the equivalent command into the command window.

In this tutorial, we will work with two data applications, one cross-sectional (student test scores and student-teacher ratio) and one time series (forecasting inflation).

Data Input and Simple Data Analysis

a) The Easy and Tedious Way: Clicking and Entering In Chapters 4 to 7 you will work with the California test score data set. These are cross-sectional data, referred to in EViews as “undated or irregular” data. There are 420 observations from K-6 and K-8 school districts for the years 1998 and 1999. You will not want to enter a large amount of data manually, but for the purpose of this introduction it will be useful that you become aware of this possibility. As a result, I will use a sub-sample of 20 observations from this data set.

To start, we must establish a workfile in EViews. Click on the File pull-down menu, and then on New and Workfile. As is common in Windows programs, you will see a dialog box.

This particular dialog box asks you for the start and end dates of your data set, and for the type of data you are entering. We are working with undated or irregular data, so check this field and enter 20 in the “End date” box. You will see a workfile window, which contains two entries. Do not worry about these for the moment. To enter the data into a format similar to the spreadsheets you have become familiar with, click on Quick in the title bar, and then on Empty Group (Edit Series).

Next enter the variables, starting with the name, in the grey box to the immediate right of “obs.” (Click on the grey box and enter first “testscr” and “str” in the adjacent one to the right.) Manual Data Entry Here are the data to enter. (EViews will add zeros. You will see later how to get rid of these.)

1 606.8 19.5 2 631.1 20.1 3 631.4 21.5 4 631.8 20.1 5 631.9 20.4 6 632.0 22.4 7 632.0 22.9 8 638.5 19.1 9 638.7 20.2 10 639.3 19.7 11 653.5 19.9 12 653.5 19.0 13 653.6 23.8 14 653.7 19.4 15 659.3 22.3 16 659.4 20.6 17 665.3 18.6 18 665.7 21.0 19 695.3 14.5 20 696.6 19.2 Entering data in this way is very tedious, and you will make data input errors frequently. You will see below how to enter data directly from a spreadsheet or an ASCII file, which are the most common forms of data you will receive in the future. Also, you noticed when you entered the test score (testscr) first and then the student-teacher ratio (str) that you were automatically moved into the test score column after entering each student-teacher data point. This is an unfortunate feature, but there is no alternative unless you enter all the data by observation.

**This is what you should see after completing the data entry:**

Summary Statistics For the moment, let’s just see if we are working with the same data set. Locate the View button at the upper-left corner of the workfile, click on it, and then click on Descriptive Statistics and Common

**sample. You should see the following output:**

If your summary statistics differ, then check the data again. Once you have located the data problem, click the Edit+/- button on the workfile toolbar, move to the observation in question, enter the correct value, and press Enter. You may want to explore some of the other toolbar buttons to see their functions. Number, for example, allows you to get rid of unnecessary digits after the decimal point, but appears only after you “freeze” the object. Once you freeze an object, you can cut and paste it into your word processing file.

Once you have entered the data, there are various things you can do with it. First, let’s get back to the data. Click on View and then choose SpreadSheet. This allows you to see the data again.

You may want to keep a hard copy of what you just entered. If so, click on the Print button.

In general, it is a good idea to save the data and your work frequently in some form. Many of us have learned through painful experiences how easy it is to lose hours of work by not backing up data/results in some fashion. There are two ways to save data in EViews. One is to save an entire workfile (Save), and the other is to store individual series (Store).

Press the Save button in the workfile toolbar, or click on File and then SaveAs in the main menu. Follow the usual Windows format for saving files (drives, directories, file type, etc.). If you save workfiles in EViews readable format, then you should use the extension “.WF1.” Once you have saved a workfile, you can call it up the next time you intend to use it by clicking on File and then Open. Try these operations by saving the current workfile under the name “SW20smpl.wf1.” Alternatively, you may want to just save a few series of the current workfile. The reason is that sometimes you use some of these original series, or transformations of these series, in a different workfile. Let’s save the test score and student-teacher series. First mark the two series in the workfile by clicking on testscr, then hold down the control button and click on str. After that, press the Store button in the workfile toolbar. Once again, a dialog box will pop up. Store the two data series in the EViews subdirectory with the extension “.db.” Next time you need to retrieve these two series, you can simply click on the Fetch button in the workfile toolbar.

**Graphical Presentations**

Most often it is a good idea to generate graphs (“pictures”) to get some “feel” for the data. Although Eviews offers many graphing options, there are two that you will use most often: line graphs, where one or more variables are plotted across entities, and scatterplots (crossplots), where one variable is graphed against another.

First set the sample to 1-20 either by clicking on the Sample button in the workfile toolbar or by entering “smpl 1 20” in the command line. Then type the command “line str” in the command line.2 In the future, in interactive use you will most often work in the command window rather than clicking on buttons.

Alternatively the same graph can be generated by marking the variable str first and then double clicking on it. In the resulting Series window, click on View /Line Graph.

After the graph appears, double click on the graph and alter it until it looks like the one below. Some of the alterations can be made in the resulting dialog box; others, such as text inserted, title of the graph, etc., have to be edited in.

Because in general we are interested either in causal relationships between variables or in the ability of one variable to forecast another, it is a good idea to plot two variables together. Commands, such as line, can often be modified by an option in parentheses. In this case, “m” means “display multiple graphs.” Use the line command to generate the graph below.3 To get an even better idea about the relationship, you can display a two-dimensional relationship in a scatterplot. The command is scat series1 series2, where series1 is used for the horizontal axis.4 Adding the option (r) fits a linear (regression) line through the points.

Pushing buttons is relegated to footnotes from here on. You should work with commands now. If you have to, mark testscr and str this time, select View and then Graph in the Group Window (or in one graph below the other: select View and then Multiple Graphs).

Double click on the graph that displays the test score and the student-teacher ratio in the same graph. The dialog box opens. In the upper-left corner choose Scatter Graph under Graph Type. Experiment with the options, including the Freeze button, until you can replicate the graph above.