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metricsexam1f07

# metricsexam1f07 - Econometrics Exam 1 By writing your PID...

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Econometrics Exam 1 By writing your PID below, you are indicating October 24, 2007 your intention to abide by the honor pledge: PID: This exam consists of ten short questions ( worth four points apiece ) and three long questions ( worth twelve points each ) , for a total of 76 points. You have 50 minutes to answer all completely and clearly in the space provided. 1. What is classical measurement error , and how does it affect the OLS estimator? 2. You estimate the effect of a percentage change in the price of widgets on the percentage decrease in demand for widgets, using the equation ln DEMAND i = ! 1 + 2 ln PRICE i + e i ( where 2 is interpreted as the own - price elasticity ) . You estimate that ˆ 2 = " 0.78 , with a standard deviation of 0.21 . How would you test the hypothesis that demand is unit elastic ( H 0 : 2 = " 1 ) against the alternative that it is not ( H A : 2 " # 1 ) , without any help from Stata? 3. Suppose that you have no problem with endogeneity, but you estimate a model using IV instead of OLS. What is the disadvantage of this technique? Support your answer with a mathematical expression.

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metricsexam1f07 - Econometrics Exam 1 By writing your PID...

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