Suppose you estimate following model Y, = Bo+B,X1 +B2X2 ++B10X10+u. You would like to test joint significance of all explanatory variables in explaining Y and you have 200 observations. The number of restrictions is and your degrees of freedom in unrestricted model are O 10; 190 O 11: 190 O 10; 189 O 11,189 None of the above
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- Based on the graphical representation below, select the answer which best interprets the graphical representation. X2 4- 3 2- U = 6 1- U = 4 1 X1 2 3 O a. (2,3) is preferred strictly to (2,2) - (4,1) O b. (4,1) is preferred strictly to (2,2) and (2,3) O c. None of the above O d. (2,3) is preferred strictly to (2,2) and (4,1)Problem 2 In economics we are often faced with causal problems where the endogeneity arises because of simultaneity. A classic example is that if you are interested in estimating a demand curve, the issue is what you observe in the data are equli- birum and prices and quantity which is not only a function of demand but also a function of supply. In this excercise we will generalize the problem of simul- taneity bias. Consider a situation where we are interested in the effect of T; on Y₁, i.e. obtain- ing a consistent estimate of a. But Y; also effects T₁. Let X; be some exogenous 1 covariates affecting both Y; and T₁. Let us imagine you have an exogenous vari- able Z which only effects T; but does not directly effect Y₁. In particular, consider the following structural equations: = Y₁ Ti where E (u; | X₁, Z;) = 0 and E (v; | Xį, Zi) = 0 aTi + Xiß + ui pY; + X₁Y+Z₁8+ Vi (1) (2)The problems with e.g."Acid rain" created by emissions of sulfur dioxide has been onemajor problem in Sweden, not least because emissions have occurred in other countries (eg England and Denmark) andthen transported here. Now assume that if one tonne of sulfur is emitted in England, it results in one (1) gram of sulfur deposition in Sweden. The corresponding deposit of one tonne of sulfur emissions in Denmark is assumed to be 3 grams. Suppose further that The socio-economic damage of one gram of sulfur deposit can be estimated at SEK 0.10.The marginal cost of reduce sulfur emissions in England is estimated at Z SEK per tonne, and in Denmark the equivalent is estimatedcost to 2Z SEK per tonne. Z indicates here the emission reduction in tonnes (eg in Denmark it would cost SEK 4 toreduce emissions by two tonnes). In other words, Z = 0 corresponds to the emission level where there is no reductionemissions occur. a) Suppose now that the European Union decides that Denmark and England…
- 20- If OLS is used in the presence of autocorrelation, which of the following will be likely consequences? i) Coefficient estimates may be inconsistent ii) Hypothesis tests could reach the wrong conclusions iii) Coefficient estimates made from the model could be biased iv) Standard errors and t-statistics may be misleading O a. (1) and (Iv) only O b. (1) and (ii) only O C (). (1), and (1) only O d. (1), (11), (I) and (iv) onlya b and c pleaseGive typing answer with explanation and conclusion Suppose that the government must undertake an irreversible policy decision regarding the extent of air pollution regulation. The government is making this decision in a situation of uncertainty, however. In particular, there is some probability p that the benefits will remain the same as they are this year for all future years, but there is some probability 1 - p that benefits will be less in all future years. If we take into consideration the multiperiod aspects, should we err on the side of overregulation or underregulation, compared to what we would do in a single-period choice?
- rd/ My courses / Faculty Of Economics & Administrative Sciences / ECON309 / Finals / ECON 309 F 20 11. The following are all least squares assumptions with the exception of: O a. They are independently and identically distributed. out of b. The explanatory variable in regression model is normally distributed. uestion Oc. Large outliers are unlikely. O d. The conditional distribution of given has a mean of zero. ous pagei need this in words not handwritten just Rewrite thisq14-