6. We ran a Vector-autoregresive model with five variables: with dtrade (change in trade balance), drex (change in real exchange rate), diipuk (change in Index of UK Industrial production), diipus ((change in Index of US Industrial production) and doilpr (change in Index of Oil price Index) and the result for lag length selection is as follows: Lag 1 2 3 Log-Likelihood 4397.98 4547.56 4591.56 4610.42 4630.33 p-values for Log-Likelihood Ratio Test 0 0 0.049 0.03 AIC -21.2735 -21.8768 -21.9688 -21.6308 -21.5098 SBC -21.2248 -21.5845 -21.433 -21.1597 -20.8915 Which model should you choose based on different criteria and why?

In a study of the lung function of children, the volume of air exhaled under force in one second is called FEV1. (FEV1 stands for forced expiratory volume in one second.) Measurements were made on a group of children each year for two years. A linear model was fit to predict this year’s FEV1 as a function of last year’s FEV1 (in liters), the child’s gender (0 = Male, 1 = Female), the child’s height (in m), and the ambient atmospheric pressure (in mm). To try to improve the prediction of FEV1, additional independent variables are included in the model. These new variables are Weight (in kg), the product (interaction) of Height and Weight, and the ambient temperature (in °C). The following MINITAB output presents results of fitting the model   FEV1 = β0 + β1 Last FEV1 + β2 Gender + β3 Height + β4 Weight + β5 Height · Weight + β6 Temperature + β7 Pressure + ε  a) The F statistic is? b) How many degrees of freedom does the F statistic have? c) Find the P-value for the F statistic. Is the…

Suppose we have a panel data of of 100 firms over 20 years at a monthly frequency. We are interested in how firms’ bond ratings affect their investment. Give an example of an omitted variable that can be fixed by Fixed Effects or First Differences. Give another example of an omitted variable that cannot be fixed by Fixed Effects or First Differences

The following is the cost data for planting rice Alternative /Brand Manual Mesin Gamma Mega Betha Machine Machine Fixed cost 15 000 55 000 175 000 (Rp 1000,-/year) Variable costs 1 200 1 000 800 500 (Rp 1000,-/ha) Get in the range of planting area how many hectares / year using manual power, beta machines, Gamma machines and Beta machines.