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# FP2 - Econ 444 Elementary Econometrics Fall 2007 SUMMARIES...

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Econ 444 Elementary Econometrics Fall 2007 SUMMARIES AND SAMPLE PROBLEMS FOR CHAPTER 9 AND SAMPLE TRUE-FALSE PROBLEMS SUMMARIES KEY TERMS AND CONCEPTS Serial correlation, Positive serial correlation, Negative serial correlation, Durbin-Watson test, Cochrane-Orcutt technique, Unit root FORMULAS AND RESULTS Cochrane-Orcutt technique for dealing with first order serial correlation Y i = β 0 + β 1 X i + i where i = ρ i - 1 + u i Then define Y * i = Y i - ρY i - 1 , X * i = X i - ρX i - 1 Y * i = β 0 (1 - ρ ) + β 1 X * i + u i SAMPLE PROBLEMS 1. Use Statistical Tables B-4, B-5, and B-6 to test the null hypothesis of no serial correlation given the following Durbin-Watson statistics for serial correlation. Here, ”one-sided positive test” means that the alternative hypothesis is that positive serial correlation exists. (a) d = 0 . 81 , K = 3 , N = 21 , 5 percent, one-sided positive test (b) d = 3 . 48 , K = 2 , N = 15 , 1 percent, one-sided positive test (c) d = 1 . 56 , K = 5 , N = 30 , 1 percent, one-sided positive test (d) d = 2 . 84 , K = 4 , N = 35 , 5 percent, two-sided test (e) d = 1 . 75 , K = 1 , N = 45 , 1 percent, one-sided positive test (f) d = 0 . 91 , K = 2 , N = 28 , 5 percent, two-sided test (g) d = 1 . 03 , K = 6 , N = 26 , 5 percent, one-sided positive test (h) d = 3 . 89 , K - 2 , N = 100 , 5 percent, one-sided positive test

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FP2 - Econ 444 Elementary Econometrics Fall 2007 SUMMARIES...

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