Lahore School of Economics
MPHIL Advanced Econometrics
Winter 2011
Quiz 2
Question 1. Consider the following two equation model:
(A)
Verify that as stated, neither equation is identified. (5 points)
(B)
Suppose that the model was as stated.
How would you write the model in the general matrix form: (5 points)
y
t
’Γ
+
x
t
’B
=
ε
t
’
(C)
Use this to find the reduced form equations of the model above. (10 points)
Question 2. Suppose that you have a generalized least squares (GLS) model given by:
(A)
Write out the GLS estimator,
, the OLS estimator,
b
, and the difference between them,
. (10 points)
(B) Suppose that the covariance between the GLS estimator and the difference between it and the OLS estimator is
given by:
Prove that this is equal to zero.
(10 points)
Question 3.
Christenson and Greene (1976) estimated a generalized CobbDouglas cost function for electricity generation
in the form:
Ln C = α + βLnQ +γ(LnQ)
2
+ δ
k
LnP
k
+ δ
l
LnP
l
+ δ
f
LnP
f
(1)
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View Full DocumentWhere P
k
, P
l
, P
f
indicate unit prices of capital, labour, and fuel respectively, Q is output and C is total cost.
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 Spring '10
 Cowell
 Econometrics, Regression Analysis, Variance, serial correlation, Lahore School of Economics, MPHIL Advanced Econometrics

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