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**Unformatted text preview: **ECM3MEC
Semester 1, 2016 Practice Exercise Please note that this document does not represent thoﬂnal exam questions. But it 1's to show some
exercises, which are referred to tutorials, lecture notes and the prescribed textbook. Question 1 To investigate detenninants on net financial wealth (nettfa), an organization collected data on age of
the survey respondent (a ge), annual family income (inc), family'size) and participation in ce1tain
pension plans for people in the United States (e401k), marriage status (marr). The wealth and income
variables are both recorded in thousands of dollars. Estimated equation is given as below: nettfa = 20.325 - 0.203mc + 0.0mm:2 - 1.69age + 0.031age2 — 1.29fsize + 9.4le401k + 0.64ma1e — 2.9marr
(10.03) (0.078) (0.0006) (0.498) (0.005?) (0.498) (1.28) (1.61) (1.698)
R2 = 0.2039 n = 9275 SSR = 30204719 where standard errors are presented in brackets. a. Interpret the slope coefficients and discuss their economic meaning. What coefﬁcients are
statistically signiﬁcant? (1‘ 2 -' ".L’: ‘ (huff ' . ,
i9“ 7751.611) III). 30:11 V6 C m {1‘ Cite (ﬂat-LG. (l 1’ (inmfar— PUG .HVQ Cl r'.:/l7'(':oLQ
VOL LL13, . . . .
651mm (H 1’ thlr >
@Tfm H J,‘ (‘./.‘((:._‘i_] (J 46 (MC/2' (-‘I'JL"-'S 4({0 mu”. 1‘ C1 bit. tg mil S'tizt'l'fti] “Hal?“ :1" {if miﬂt‘md _ . . . rYLCg‘xununq
b. chl level of age and level of Income at winch the wealth mm. given the following equation: '=- @1100:an
nettfa = 19.06 - 0.246inc + 0.0mm2 - 1.54age + 0.03’1age2 _ 1.85fsize + 9.45:401k (9.97) (0.075) (0.0006) (0.491) (0.0057) (0.4) (1.20)
111:0.2036 11:9275 SSR=30216419 cl. What is implied by the below estimated equation? Discuss the implication. ‘73 A , . A
a? = 978.96 — 80.1 f nettfa + 0.854inettfa2
(5.15) (0.978) @’ Nﬂfi’l— A, vw‘ﬁr J1) [JZC/‘f_LLrQ
___+ )_ R2=0.9511 n=9275 Weak 112,. (ff-V Wm ((0.134le where u is residuals ﬁ'om the equation in part a, and the standard errors are reported in brackets e. Design a new equation that can differentiate net wealth of single male and single female from the
others. ~~ H _. , . ‘ - .
._.. I; I i ES); Fg are, “in. (tar/hiya: (.‘l/[ffeir‘ancfo thyonrsl’ﬁm/ beﬁtfonv‘xz Question 2 film: (“G/i Put "ll yd; (J (Wu!) G N( [(11.7 bE’MQ (fat!) C S‘dhj‘io‘ f‘)‘Lr\_,€Q_)
One version of the permanent income hypothesis .f consumption is that ﬁle growth in, consumption is unpredictable. [Another version is t mt the change in consumption itself is
WSM. Chapter 15) for discussion of the PIH.] Let go; = log(c:) - log(ct.1)
be the growth in real per capita consumption (of nonchn'ables and services). Then the PIH implies that
E(gc;/Ig.1) = E(gct), where 13-1 denotes information known at time (t-l); in this case, t denotes a year. a. From the estimated equation below, how caléyou conclude about the validity of PIH? c' t
got = 0. 11 + 0.4f6 gem (0.0038) (0.156)
R2 = 0.1985 n = 35 ‘7 ' i Z 1fl‘"‘._ "L 13-") I 1-; 2" '2': ( , (‘8‘) 5—0 a ' :’ ~O (ﬁx/awaits! Mt) Cr) RLL‘J‘QLHGIL with»: (‘0qu Hi; Ho of [79171 [13 [7‘51 iii [on (ﬁlm w 101,2 (rr‘
Lil-Mt or Him 9.; OLIZ‘ b. In order to have further investigation on predictability of the growth in consumption, we
incorporate growth in per capita lea-l income (gy),3-1no11th bill iate (i3) and inﬂation 1ate (int).A1'e
these new variables individlzaily 01 jointly signiﬁcant at the 5% level using appmpnate tests? [7
gct= 0. 226 + 0. 433 get.1— 0.1 8 gym — 0. 0g07i3t_ 1 — 0.(]0081nft1
(0.007) (0.289) (0.1946) (0.001) (0.001)
R2 = 0.303 11 = 35 ' l (12,,
.. ch‘UlflmW/t
l (but! HT" 7'01) H‘ 1 (Li.— [emf (ma d We £26328 :{l C} // (irr'qlgﬁg _ ‘ PVaCUf‘Cl/ij +0 “Hid HZ); ftp, FMth/ful'modgx LA ﬁx; one. in Part (a) ‘.
Reacvﬂh’l’uj +0 13119, H” ”mi LLrLfﬂz‘Sth'C/hld Marcia/Q 1:5 qu‘zd‘U-J mfmf 09 " CJ-{h‘ca/e- Lin/emf, {Tm “me P Jib Hibahm wLHZ‘ dlfﬂwuwmfor): g ‘ ' ' _ "H H . O T . 7’
(number (if ms th‘wng) and dfzﬁcimmn‘mj‘w)‘ n I 44’ # g J ‘4 2% 00V
J C61” Wﬂdnnﬂ'ﬂg mica/13g) 6 - If” ltfztﬁ’lw I
afﬁrm riﬂe ', WI‘Z'W Hm. Hz) 'rdﬂ F gawk V5 (WWW $61M 2‘ {1‘ 6" F : W Mm ' ‘F‘ ““W ‘f WW”
Mamba ' 93 Z / (r1 "' k ~ 0 L num’bzr c ,Qx M [email protected]
Mir J m ‘HZLQ— u’U‘M ‘h’TL W‘Cigl Wa/ CU‘GL njEL (JLVM SE a! VIP Q’LLWLU dﬂ'Li/Q. CL YULLU Y‘I’YLL-L/éﬂ 1’?) f Z_ ‘ - 2‘ A _ J
GLLLMLth/ ﬁa’amhb 1,05le Klan/«21; Mai K __ I :21?— - (23 —+ may?
:3) F _, ‘_ _ w r
«mm (I -~ REA/6» M ) (my .' I- —~
.: ﬂy}? : was} 42.96 Q — (ifzao_3>/(?>{;- [4‘0
Acadﬂil/‘dj 4D W Fﬁjacﬁm Hub” 1x0— rfml CID Pig‘gdf Ml Ha‘
”Ufa- Wren, mwf chtrmlobu (UL TOMA—B? mg’iﬁmffmnf Qkﬂﬁ'caéﬂj aj‘
570. c. “That are you informed from this equation? Discuss any further tests and corrections to make our model robus . 0
'. F10 If” 97/ F35 9’ I . (:2. ‘
‘0‘, = 0.0209 - 0.802 gem + 0.089 gym - 000121334 + 0.00018inﬁ.1 + 0.76 6370:;1 + 0. 350,4
(0.015) (0.597) (0.206) (0.0013) (0.001) (0.504) (0.274) R1 = 0.079 u= 35 ...

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