Questions from General Economics

Q: Use the data in CARD for this exercise. (i

Use the data in CARD for this exercise. (i) The equation is as where the other explanatory variables are listed in Table 15.1. In order for IV to be consistent, the IV for educ, nearc4, must be uncorr...

Q: Use the data in INTDEF for this exercise. A simple equation

Use the data in INTDEF for this exercise. A simple equation relating the three-month T-bill rate to the inflation rate (constructed from the Consumer Price Index) is (i) Estimate this equation by OLS,...

Q: Use the data in CARD for this exercise. (i

Use the data in CARD for this exercise. (i) In Table 15.1, the difference between the IV and OLS estimates of the return to education is economically important. Obtain the reduced form residuals,

Q: Use the data in MURDER for this exercise. The variable mrdrte

Use the data in MURDER for this exercise. The variable mrdrte is the murder rate, that is, the number of murders per 100,000 people. The variable exec is the total number of prisoners executed for the...

Q: Use the data in PHILLIPS for this exercise. (i

Use the data in PHILLIPS for this exercise. (i) Estimate an AR(1) model for the unemployment rate. Use this equation to predict the unemployment rate for 2004. Compare this with the actual unemploymen...

Q: Use the data in PHILLIPS for this exercise. (i

Use the data in PHILLIPS for this exercise. (i) In Example 11.5, we estimated an expectations augmented Phillips curve of the form where ∆inft = inft – inft-1. In e...

Q: Use the data in 401KSUBS for this exercise. The equation of

Use the data in 401KSUBS for this exercise. The equation of interest is a linear probability model: The goal is to test whether there is a tradeoff between participating in a 401(k) plan and having an...

Q: The purpose of this exercise is to compare the estimates and standard

The purpose of this exercise is to compare the estimates and standard errors obtained by correctly using 2SLS with those obtained using inappropriate procedures. Use the data file WAGE2. (i) Use a 2SL...

Q: When the errors in a regression model have AR(1)

When the errors in a regression model have AR(1) serial correlation, why do the OLS standard errors tend to underestimate the sampling variation in the

Q: Explain what is wrong with the following statement: “The Cochrane

Explain what is wrong with the following statement: “The Cochrane-Orcutt and Prais-Winsten methods are both used to obtain valid standard errors for the OLS estimates when there is a serial correlatio...