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:
Preparatory Course
There is a compulsory
preparatory course that runs for one week before the start of the
Diploma. The aim of the course is to provide an introduction to
microeconomics, macroeconomics and econometrics.
Microeconomics
The aims are to introduce students to microeconomic issues and
problems, including the application of optimisation methods to the
analysis of economic behaviour and market outcomes. After completing
the course, students should have an understanding of (i) utility
maximisation; (ii) comparative statics; (iii) positive and normative
analysis; (iv) cost minimisation; (v) profit maximisation; (vi) supply
and demand analysis; (vii) market equilibrium; (viii) basics of
competitiveequilibrium theory and welfare economics; (ix) elementary
game theory and industrial organisation.
Macroeconomics
This introductory course focuses on the macro economy as a general
equilibrium system and discusses how goods, money and factor markets
interact to determine national income and its components. The first
part of the course discusses macroeconomic equilibrium in the long-run.
The topics to be covered are: income determination, the neo-classical
model of economic growth, equilibrium unemployment, money neutrality
and inflation. The second part discusses macroeconomic equilibrium in
the short-run, and covers topics such as elementary Keynesian models,
income determination in the IS-LM model, stabilisation policy,
aggregate demand, aggregate supply and the labour market, and nominal
and real rigidities and business cycle fluctuations.
Econometrics
This course has two components: Mathematics and Statistics. The
Mathematics component covers elementary calculus, elementary linear
algebra, difference and differential equations, and some topics in more
advanced calculus, including constrained optimization. For statistics,
the main purpose is to prepare students to the Econometrics courses.
The course would cover descriptive statistics, probability
distributions, law of large numbers, central limit theorem, sampling
distributions, the concept of an estimator, unbiasedness, consistency,
bivariate distributions, correlation and bivariate regression.
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.
