322Exam02Fall11 - ECONOMETRICS Fall 2011 Exam II Nov 14...

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ECONOMETRICS Fall 2011 Exam II Nov. 14. 2011 Instructor : Hyun Hak Kim Name ID # Notice 1. You can use a calculator and one-page of a letter size of cheat sheet. 2. No books and no notes are permitted. 3. Please submit your cheat sheet paper with your exam.
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Fall 2011 Rutgers University 2 1) (50pts) You recall from one of your earlier lectures in macroeconomics that the per capita income depends on the savings rate of the country: those who save more end up with a higher standard of living. To test this theory, you collect data from the Penn World Tables on GDP per worker relative to the United States ( RelProd ) in 1990 and the average investment share of GDP from 1980-1990 ( S K ), remembering that investment equals saving. The regression results in the following output: = –0.08 + 2.44× S K , R 2 =0.46, SER = 0.21 (0.04) (0 .38) (a) Interpret the regression results carefully. (b) Calculate the t -statistics to determine whether the two coefficients are significantly different from zero. Justify the use of a one-sided or two-sided test. (c) You accidentally forget to use the heteroskedasticity-robust standard errors option in your regression package and estimate the equation using homoskedasticity-only standard errors. This changes the results as follows: = -0.08 + 2.44× S K , R 2 =0.46, SER = 0.21 (0.26) You are delighted to find that the coefficients have not changed at all and that your results have become even more significant. Why haven't the coefficients changed? Are the results really more significant? Explain.
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This note was uploaded on 01/17/2012 for the course ECONOMICS 322 taught by Professor Derekdelia during the Fall '09 term at Rutgers.

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322Exam02Fall11 - ECONOMETRICS Fall 2011 Exam II Nov 14...

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