Stream1Gate - T HE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF...

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THE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF ECONOMICS ECON 2206/EcON 3290 (ARTS) I:'iTRODUCTORY ECO"OMETRICS FINAL EXAMINATION SEMESTER 1, 2006 1. TIME ALLOWED - 2 Hours. 2. TOTAL NUMBER OF QUESTIONS - 6. 3. ANSWER ALL QUESTIONS. 4. ALL QUESTIONS ARE OF EQUAL VALUE (The marks awarded to each part of a question are indicated - the total marks for this exam is 60). 5. CANDIDATES MAY BRING THEIR OWN CALCULATORS TO THE EXAM 6. STATISTICAL TABLES ARE PROVIDED AT THE END OF THE EXAM PAPER 7. ALL ANSWERS MUST BE WRITTEN IN PEN. PENCILS MAY BE USED ONLY FOR DRAWING, SKETCHING OR GRAPHICAL WORK.
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ANSWER ALL SIX QUESTIONS REMINDER: When performing statistical tests, always state the null and alternative hypothe- ses, the test statistic and it's distribution under the null hypothesis, the level of significance and the conclusion of the test. Question 1. (10 Marks). (i) What is the "spurious regression" problem, and how can this problem be avoided when using OL8 with time-series data ? (4 marks) (ii) What is the meaning of the term "contemporaneous exogeneity" as used in the context of time series data? What is the difference between contemporaneous exogeneity and the zero conditional mean (ZCM) assumption in the multiple regression model for time series data? (iii) Consider the following model used to explain the wages of workers: wage = (30 + (31 educ + (32 exper + (33 2 + u where is the hourly wage (measured in dollars), educ is years of education and is years of work experience. In terms of the parameters of the population model, what is the effect on the expected wage of an extra year of experience? (2 2
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Question 2. (10 Marks in total) The following regression model was used to explain child birth weight (bwght - measured in kilograms): bwght = f3 0 + f3 1 cigs + f3 2 parity + f33faminc + f3 4 motheduc + f35fatheduc + u (2.1) where cigs=average number of cigarettes the mother smoked per day during pregnancy, parity=birth order, faminc=family income, motheduc=years of education for mother and fatheduc=years of education for father. Based on a sample of 1388 observation, the following estimates were obtained: Dependent Variable Independent Variables c~gs -0.0145 (0.0059) 0.0021 (0.0001 ) famine 0.0030 (0.0009) 0.0102 (0.0048) fatheduc 0.0054 (0.0022) intercept 3.8059 (0.0336) Obs 1388 R'L 0.1298 SSR 1,088.355 (i) What is the interpretation of the coefficient on cigs?
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Stream1Gate - T HE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF...

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