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Q1) When testing for overidentifying restrictions, the following procedure was suggested: 1. Estimate the structural equation by Two Stage Least Squares and obtain the Two Stage Least Squares residuals, (uˆ)1 (U hat subscript 1). 2. Regress (uˆ)1 on all exogenous variables. Obtain the R-squared, say, (R^2) subscript(1). 3. Under the null hypothesis that all Instrumental variable's are uncorrelated with u1, n(R^2) is approximately distributed by a chi-squared distribution with q degrees of freedom, where q is the number of instrumental variables from outside the model minus the total number of endogenous explanatory variables. If n(R^2)1 exceeds the critical value for the desired significance level in the chi-squared distribution, we reject the null hypothesis and conclude that at least some of the Instrumental Variables are not exogenous. Here, the (R^2) obtained in step 2 would be equal to zero always. Obtain this result in a simple regression model with an endogenous regressor X, Y = β0 + β1X + U1 and a single instrumental variable Z for X. Q2)Suppose that annual earnings and alcohol consumption are determined by the Simultaneous Equation Model: log(earnings) = β0 + β1alcohol + β2educ + u1 alcohol = γ0 + γ1 log(earnings) + γ2educ + γ3 log(price) + u2 where price is a local price index for alcohol, which includes state and local taxes. Assume that educ and price are exogenous. If β1, β2, γ1, γ2 and γ3 are all different from zero, which equation is identified? How would you estimate that equation?
The fiscal policy measure that has more direct impact on the economy is an increase in government spending if consumer confidence is lower than the previous month. One of the ways the President Obama stimulated the economy was through increased g..
phillips industries manufactures a certain product that can be sold directly to retail outlets or to the superior
Malaysia experienced sugar shortages a few years back. Goverment wanted to provide relief to the public through price control. What are the economics implications of such a move? (Use the concept of equilibrium price)
Explain what happens to output in the short run in each of the following circumstances:
As long as all resources are fully employed and every firm in the economy is producing its output using the best available technology, the result will be efficient.”Do you agree or disagree with this statement? Explain your answer.
For the country you have been following this semester, analyze the impact of financial development in its economy. Obtain quarterly (preferably, if not annual) information with at least 35 data points for the following variables:
suppose there are two consumers a and bthe utility functions of each consumer are given byuaxyxyubxyminxythe initial
How concerned should this company be about price discounts by itsleading competitors and conduct a t-test to check the statistical validity of the estimated equationat 95 percentconfidence.
a study of the costs of electricity generation for a sample of 56 british firms in 1946-1947 yielded the following
What determines the slope of the per-worker production function How do "rules of the game" affect productivity and growth What types of "rules" should a government set to encourage growth
What is the current rate of unemployment
in an economy in which government expenditure is 100 billion exports are 60 billion imports are 15 percent of real gdp
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