The Diploma in Economics is a nine month taught course (from the beginning of
October to the end of June) for students whose first degree contains little or
no economics. It provides a qualification equivalent to a second
bachelor’s degree in economics and serves two different purposes.
First, the
Diploma serves as a preliminary qualification for people wishing to continue
advanced education in economics at the master’s level, at the University of
Cambridge or elsewhere. Diploma students may therefore apply to continue with
the MPhil programme in economics after the Diploma examinations. Continuation
is conditional on a good examination performance.
Second, the
Diploma serves as a stand-alone education for those who want a rigorous introduction
to economics but who do not with to pursue further studies but who want to
complement their existing degree with knowledge of economics.
Since modern
economics makes frequent use of formal (mathematical and statistical) analysis,
a good mathematical background is essential for applicants to the Diploma
programme. Please see the "Entry
Requirements" section for details of the background required.
The course components are as follows:
Paper 1: Microeconomics
This paper provides candidates with a thorough, and technically rigorous
grounding in the core principles of microeconomics: consumer demand; the
theory of the firm; competitive and imperfectly competitive markets; general
equilibrium and the foundations of welfare economics. Students then go
on to examine the implications of relaxing certain key assumptions underlying
the benchmark model, most notably allowing for uncertainty, externalities
and imperfect information.
Paper 2: Macroeconomics
This paper applies a similarly rigorous approach to the study of the behaviour
of the economy as a whole. The empirical phenomena of inflation; fluctuations
in output; consumption behaviour; unemployment; fiscal and external deficits;
and economic growth are analysed with reference to alternative macro frameworks:
from sticky price Keynesian models to models with explicit optimising underpinnings.
Throughout the course particular attention is paid to the linkages between
particular macro theories and underlying micro assumptions.
Paper 3: Econometrics
This paper is intended to allow students to confront the theories learnt
in the other two papers with observed data. The primary, but not
exclusive emphasis of the paper is on random variables and random samples
in econometric techniques. Students acquire a basic understanding
of the multiple regression model, hypothesis testing, time series; stationary
and non-stationary variables; simple diagnostic tests. Practical
experience of the application of econometric techniques is an integral
part of this paper. The specific statistical techniques covered by
the paper are as follows:
-
Regression: simple properties of OLS estimators and sampling distributions
of regression coefficients and correlation coefficients; elementary analysis
of variance; testing of hypotheses; estimation and interpretation of multiple
regression coefficients; multicollinearity; elementary analysis of and
tests for misspecification, specifically serial correlation, heteroscedasticity
and structural change; introduction to the method of maximum likelihood;
maximum likelihood estimation of the linear regression model; elementary
examples of generalised least squares estimation.
-
Forecasting: conditional and unconditional forecasts and confidence
intervals.
-
Economic time-series: elementary representations of time-series
specifically first-order AR and MA representations; random walks; elementary
time-series forecasting.
-
Cross-section techniques and panel data: measurement error and the
use of instrumental variables; simple binary response models and their
application; elementary panel data models.
