FP2A - (b First regress Y i onto X i and obtain residuals e...

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Econ 444 Elementary Econometrics Fall 2007 ANSWERS TO SAMPLE PROBLEMS FOR CHAPTER 9 AND SAMPLE TRUE-FALSE PROBLEMS 1. (a) d L = 1 . 03 and d U = 1 . 67 . Because d is smaller than d L , we reject the null hypothesis. (b) Because d is greater than 2, we accept the null hypothesis. (c) d L = 0 . 88 and d U = 1 . 61 . Because d L < d < d U , the test is inconclusive. (d) d L = 1 . 13 and d U = 1 . 63 . So 4 - d L = 2 . 87 and 4 - d U = 2 . 37 Because 4 - d L < d < 4 - d U , the test is inconclusive. (e) d L = 1 . 29 and d U = 1 . 38 . Because d is greater than d U , we accept the null hypothesis. (f) d L = 1 . 15 and d U = 1 . 45 . Because d is smaller than d L , we reject the null hypothesis. (g) d L = 0 . 90 and d U = 1 . 99 . Because d L < d < d U , the test is inconclusive. (h) Because d is greater than 2, we accept the null hypothesis. 2. (a) N = 2006 - 1985 + 1 = 22 and K = 1. So d L = 1 . 24 and d U = 1 . 43 . Because d is smaller than d L , we reject the null hypothesis.
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Unformatted text preview: (b) First regress Y i onto X i and obtain residuals e i . Then regress e i onto e i-1 and obtain ˆ ρ . Finally, regress Y * i = Y i-ˆ ρY i-1 onto X * i = X i-ˆ ρX i-1 to obtain an estimate for the slope coefficient. (c) The different does not mean that both estimates are unreliable because the OLS estimator has large variance with serial correlation. The Cochrane-Orcutt method gives an estimator with smaller variance, so the estimate with this method is more reliable than the OLS estimate. 3. (a) False; (b) False; (c) True; (d) False; (e) False; (f) False; (g) False; (h) True; (i) False; (j) True; (l) False; (m) False 1...
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