Problem Set 3
Econometrics I
Due 2/17/2011
Resource Economics 702
(8)
1.
The data set
money.
xlsx on the course website contains time series data for the following
variables:
M2
= seasonally adjusted M2 monetary aggregate measured in billions of dollars;
GDP
=
seasonally adjusted annual real GDP measured in billions of chained 1996 dollars;
interest
= discount rate (%).
a.
What signs do you expect for the parameters of the model:
b.
Estimate the model and interpret the estimates.
c.
Are the estimated effects of
GDP
and
interest
rates statistically significant? Explain clearly
your conclusions.
d.
Determine the elasticity of demand for money with respect to income (
GDP
).
Determine the
elasticity of demand with respect to the
interest
rate as well.
Provide an interpretation for each
elasticity.
e.
Determine the estimated covariance matrix for the OLS estimators
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This note was uploaded on 12/08/2011 for the course ECON 702 taught by Professor Staff during the Spring '08 term at UMass (Amherst).
 Spring '08
 STAFF
 Econometrics

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