c5 (i) Add a linear time trend to equation (11.27). Is a time trend necessary in the first- difference equation? Drop the time trend and add the variables ww2 and pill to (11.27) (do not differ- ence these dummy variables). Are these variables jointly significant at the 5% level? Add the linear time trend, ww […]

Let gGDP t denote the annual percentage change in gross domestic product and let int t denote a short-term interest rate. Suppose that gGDP t is related to interest rates by gGDP t 5 a 0 1 d 0 int t 1 d 1 int t 2 1 1 u t , where u t […]

In the model (9.17), show that OLS consistently estimates a and b if a i is uncorrelated with x i and b i is uncorrelated with x i and x 2 , which are weaker assumptions than (9.19). [ Hint : Write the equation as in (9.18) and recall from Chapter 5 that sufficient for […]

C4 Use VOTE1.RAW for this exercise. Estimate a model with voteA as the dependent variable and prtystrA , democA , log( expendA ), and log( expendB ) as independent variables. Obtain the OLS re- siduals, u i , and regress these on all of the independent variables. Explain why you obtain R 2 5 0. […]

Which of the following are consequences of heteroskedasticity? The OLS estimators, b j , are inconsistent. The usual F statistic no longer has an F distribution. The OLS estimators are no longer BLUE. Answer) (i) No. Inconsistency is due to correlation between error and regressors, this is due, for example, to omitted variables, measurement error […]

In Example 7.2, let noPC be a dummy variable equal to one if the student does not own a PC, and zero otherwise. If noPC is used in place of PC in equation (7.6), what happens to the intercept in the estimated equation? What will be the coefficient on noPC ? ( Hint: Write PC […]

Use the data in VOTE1.RAW for this exercise. Consider a model with an interaction between expenditures: voteA 5 b 0 1 b 1 prtystrA 1 b 2 expendA 1 b 3 expendB 1 b 4 expendA expendB 1 u. What is the partial effect of expendB on voteA , holding prtystrA and expendA fixed? What […]

Consider the analysis in Computer Exercise C11 in Chapter 4 using the data in HTV.RAW, where educ is the dependent variable in a regression. How many different values are taken on by educ in the sample? Does educ have a continuous distribution? Plot a histogram of educ with a normal distribution overlay. Does the distribution […]

The following model can be used to study whether campaign expenditures affect election outcomes: voteA 5 b 0 1 b 1 log( expendA ) 1 b 2 log( expendB ) 1 b 3 prtystrA 1 u , where voteA is the percentage of the vote received by Candidate A, expendA and expendB are campaign expenditures […]

Consider the estimated equation from Example 4.3, which can be used to study the effects of skipping class on college GPA: c olGPA 5 1.39 1 .412 hsGPA 1 .015 ACT 2 .083 skipped (.33) (.094) (.011) (.026) n 5 141, R 2 5 .234. Using the standard normal approximation, find the 95% confidence interval […]

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