ECONOMETRICS
Fall 2011
Exam II
Nov. 14. 2011
Instructor : Hyun Hak Kim
Name
ID #
Notice
1.
You can use a calculator and onepage 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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View Full DocumentFall 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 19801990
(
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 onesided or twosided test.
(c) You accidentally forget to use the heteroskedasticityrobust standard errors option in your
regression package and estimate the equation using homoskedasticityonly 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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 Fall '09
 DEREKDELIA
 Econometrics, Regression Analysis, Null hypothesis, standard errors, Rutgers University, average hourly earnings, Hyun Hak Kim

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