The Suntory and Toyota International Centres for Economics and Related Disciplines

Topics in Applied Econometrics by Kenneth F. WallisReview by: W. J. CorlettEconomica, New Series, Vol. 42, No. 166 (May, 1975), p. 227Published by: Wiley on behalf of The London School of Economics and Political Science and TheSuntory and Toyota International Centres for Economics and Related DisciplinesStable URL: http://www.jstor.org/stable/2553613 .

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1975] BOOK REVIEWS 227

tional F-test of the regression parameters is derived from a T2-test which is justified by analogy with the t-test.

A novel feature of this book is that each chapter is supplemented by an appendix containing computer programs which will effect the necessary calculations. These programs are designed for use by students who do not know FORTRAN; they are written in a natural way so that they can be understood from first principles by an interested student and are therefore not efficient. In view of this it is surprising to discover that the authors prefer to treat the analyses of variance and covariance in a classical manner rather than as dummy variable regressions which are computationally inefficient but far more comprehensible. The final chapter of the book contains a very useful introduction to spectral analysis.

The book is designed as a year's course for graduates and advanced undergraduates taken prior to a course in econometrics. As such it is excellent; it is essentially free of typographical errors, well written and well indexed and the computer programs have been tested on three machines. However, there are relatively few institutions in the UK offering a two-year course in econometrics, thus although many practitioners may like to have a copy on their bookshelves, it is unlikely to find wide application as a textbook in this country. University of Manchester R. W. FAREBROTHER

Topics in Applied Econometrics. By KENNETH F. WALLIS. Gray-Mills Publishing Ltd. London. 1973. 136 pp. ?3050. Paperback, ?1E25.

This is the fifth in the series Lectures in Economics which contains the same author's Introductory Econometrics. The lectures on which it is based were sequels to those for the earlier book. It is not a general survey of applied econometrics; the aim is to discuss problems of applied work by concentrating on a few particular topics. There are chapters on four topics: the consumption function, the production function, the investment function and simultaneous equation systems.

The book covers the main features of the various topics in a clear and simple way, while being as thorough as one could reasonably expect in a book of this length. In only a few places is clarity missing, as in the treat- ment of production functions, where homogeneity appears to enter as a property rather than as an assumption and in the discussion of multipliers in current values, where failure to make the assumptions explicit makes the algebra obscure. Sometimes the attempt to be simple may mislead. Thus the use of deflated variables is justified by a spurious argument about spurious correlation which seems to suggest that x + z and y + z are always more highly correlated than x and y. Even with positive correlation between pairs of variables this is not certain; more generally it is not even more likely than the opposite. The failure of first-order conditions to give an output for profit maximization with constant returns and fixed input and output prices is "explained" by an irrelevant discussion of second-order conditions which encourages the heresy that showing that the second-order sufficient conditions are not satisfied suffices to show there is no maximum.

The blemishes are, however, minor. The book as a whole serves its pur- pose well and provides a useful introduction to applied econometrics with- oUt getting too lost in the detail of partictilar studies. University College, LonId/oni W. JI CORLETT

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