s03ps6ema - DepartmentofEconomics ECON303BobElder

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Department of Economics ECON 303                                                                                                      Bob Elder Econometric Methods                                                                                     Spring 2003 Answers –  PROBLEM SET 6 (s03ps6ema – 4/21/03) 1. Go to the Econ 303 folder and copy the 108 rows and 14 columns of data that you  find in the file called s03ps6emd1.  Subsequently paste this matrix into a Minitab  data window.  The first three columns of data include seasonally unadjusted  monthly time series observations in the U.S. from January 1969 through  December 1977 on the monetary aggregate M1 in column 1 (source:  federalreserve.gov), the total industrial production index in column 2 (source:  bea.gov), and the 3-month T-bill rate in column 3 (source:  federalreserve.gov).  The final 11 columns are monthly dummy variables.  In column 4 is D 2 , which  equals 1 if the observation is from February and equals 0 otherwise.  In column 5  is D 3 , which equals 1 if the observation is from March and equals 0 otherwise.  Generally, within columns 4 through 14 column X contains D X – 2 , which equals 1  if the observation is from month X – 2 and equals 0 otherwise. a. Create M t – 1 , ln(M t ), ln(IP t ), ln(RTB t ), and ln(M t – 1 ). MTB > lag 1 c1 c15 MTB > let c16=loge(c1) MTB > let c17=loge(c2) MTB > let c18=loge(c3) MTB > let c19=loge(c15) b. Estimate the unrestricted money demand equation  t 12 2 i it i 1 t 3 t 2 t 1 0 t u D ) M ln( ) RTB ln( ) IP ln( ) M ln( + β + α + α + α + α = = - MTB > regress c16 14 c17-c19 c4-c14 Regression Analysis The regression equation is lnMt = - 0.0280 + 0.0118 lnIPt - 0.00629 lnRTBt + 0.998 lnMt-1 - 0.0291 D2 + 0.00966 D3 + 0.0245 D4 - 0.0152 D5 + 0.0202 D6 + 0.0114 D7 - 0.00305 D8 + 0.0105 D9 + 0.0102 D10 + 0.0146 D11 + 0.0275 D12 107 cases used 1 cases contain missing values Predictor Coef StDev T P Constant -0.02797 0.01966 -1.42 0.158 1
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lnIPt 0.011842 0.009448 1.25 0.213 lnRTBt -0.006292 0.001827 -3.44 0.001 lnMt-1 0.998148 0.004919 202.93 0.000 D2 -0.029130 0.001963 -14.84 0.000 D3 0.009663 0.001996 4.84 0.000 D4 0.024504 0.001979 12.38 0.000 D5 -0.015199 0.001965 -7.74 0.000 D6 0.020191 0.002026 9.96 0.000 D7 0.011388 0.001950 5.84 0.000 D8 -0.003054 0.001960 -1.56 0.123 D9 0.010465 0.002011 5.20 0.000 D10 0.010176 0.002010 5.06 0.000 D11 0.014637 0.001970 7.43 0.000 D12 0.027492 0.001943 14.15 0.000 S = 0.003992 R-Sq = 99.9% R-Sq(adj) = 99.9% Analysis of Variance Source DF SS MS F P Regression 14 2.45762 0.17554 11015.01 0.000 Residual Error
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s03ps6ema - DepartmentofEconomics ECON303BobElder

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