eaexam06 - Applied Econometrics Exam 2006 2 hours Answer 2...

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Applied Econometrics Exam 2006 2 hours Answer 2 questions Question 1 Consider the model: yx it it it =+ ' βε where the index i refers to the industry and t to time, with: ε α η it i it where is an industry specific error term and cov ( ,x )=0 for all i,t . a) Explain the problems of estimating this model as OLS. (20%) b) Consider the assumptions that is uncorrelated with the regressors and that is an industry- specific stochastic disturbance, independent of time, and assumed to be uncorrelated across industries, or with the term. What models do these imply and what are their statistical properties? (20%) c) The following results are for a growth model estimated using panel data for the 45 industries in South Africa, where the dependent variable is the growth of value added in production for each industry. A dummy variable for the twelve defence related industries was also employed to capture the differences between military and non-military government spending effects.
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This note was uploaded on 09/12/2010 for the course GERAS 099876f taught by Professor Gtewewa during the Spring '09 term at Aberystwyth University.

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eaexam06 - Applied Econometrics Exam 2006 2 hours Answer 2...

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