{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PS1 - 386-2 Spring 2008 Problem Set#1 Due April 9 Exercise...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
386-2 Problem Set #1 Spring 2008 Due April 9 Exercise 1 In this problem you are asked to write down an application you are interested in studying. Later in the course you will be asked to follow up and perform the analysis. So keep your application realistic. In particular, focus on either data from the text book or data that you can get otherwise. a. Suggest a question that you could answer using econometric methods. This question can be an economic question, a question from another discipline or any question that you want to know the answer to. b. Write down an econometric model that would allow you to answer the question you propose in (a). What is the dependent variable? The independent variables? What is included in the error term and why is the error term likely to satisfy the standard assumptions? How would you use the model to answer the question? c. What data would you need to estimate the model? Where could you get these data? Exercise 2 You estimate the model by OLS.. You are concerned that the regressor, , might be correlated with the error term, . You decide to test this by the following procedure: (i) Regress on and obtain estimates of the coefficients. (ii) Use these estimates to compute the estimated residuals, . (iii) Compute the sample covariance between X i and , given by where is the sample mean of and is the sample mean of .
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}