2. [7+3+5+10] Consider the following modelwhereetis i.i.d and |p| < 1.Yt= Bo+B1xt + utUt= put-1 + et, t = 1, 2, … … · ‚T,(a) Show that variance of the usual OLS estimator (0² / Σ(x+ - x)²) underestimates the true varianceof the OLS estimator.(b) The value of the Durbin-Watson statistic turned out to be 1.4. Compute an estimate of p, the serialcorrelation parameter, based on the value of the Durbin-Watson statistic.(c) Suppose you also wish to test for serial correlation using Durbin's alternative test (Durbin's h-test) at the 5 percent significance. After estimating the original regression on the entire 80 sam-ples, you saved the residuals and estimated the following auxiliary regression.Et=0.07 + 0.08æt+ 0.3 êt_1(0.04) (0.02)(0.1)(Standard errors are in parentheses.) Give the value of the test statistic, and your conclusion(accept or reject the null hypothesis of no serial correlation).(d) Regardless of your answers to parts (a)-(c), suppose you believe that serial correlation is indeedpresent. Elaborate on FGLS procedure.

(a) When serial correlation is present, the variance of the standard OLS estimator, which is based…

Answered: 2. [7+3+5+10] Consider the following…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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