Dheeraj Suri Classes www.primeacademy.in +91 9899192027 Introductory Econometrics Economics (H) Sem IV 2019 Question Paper For Full Course Video Lectures of All Subjects of Eco. (Hons), B Com (H), BBE, MA Economics, NTA UGC NET Economics, Indian Economic Service (IES) Register yourself at www.primeacademy.in Dheeraj Suri Classes Prime Academy 9899192027Prime Academy, www.primeacademy.in Name of the Paper : Introductory Econometrics Name of the Course : BA (H) Economies - CBCS Core Semester : IV ‘Time : 3 Hours Maximum Marks : 75 Instructions for Candidates : (a) Write your Roll No. on the top immediately on receipt of this question paper. (b) Answer may be written either in English or in Hindi but the same medium should be used throughout the paper. (c) Answer any five questions out of seven. (@ All questions carry equal marks. (©) Use of simple non-programmable calculator is allowed. Statistical tables are attached for your reference. 1. State whether the following statements are True or False. Give reasons for your answer. (a) Ina regression model In¥; = B, + B2X; + uj, if By is multiplied by 100 we obtain the growth rate of Yj. (b) In regression through origin models the conventionally computed 1 may not be meaningful. (©) In simple regression model ¥; = B, + 6X; + uj the OLS estimators #, and , each follow normal distribution only if u; follows normal distribution. (@)__ P-value of a test statistic is equal to the level of significance. (©) If the estimate of slope coefficient in a bivariate regression is zero, the measure of coefficient of determination is also zero. 2(a) You have the following information : YX = 1680, YY = 1110, YXY = 204200, 5x2 = 315400, YY? = 133300, n=10. Assume all assumptions of CLRM are fulfilled. Obtain @ Band B. (ii) Establish 95% interval for the population slope coefficient 62. (ii) R?. mM (b) | Average score of students in a certain exam are known to be normally distributed with mean value 75 and standard deviation 9. Some coaching cla: claim that it is possible to increase the average score of students with an additional use of study material. It is believed that score with additional study material would remain normally distributed with o = 9. Let 1 denote the true average score of students when additional material is used. 6) What are appropriate null and alternative hypothesis? Gi) Let X denote the sample average score for 25 randomly selected students. Consider the test procedure with test statistic X and rejection region X > Econometrics By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in 77.9. What is the probability distribution of the statistic when Ho is true? Whaat is the probability of type I error? (iii) Using the testing procedure in (ii) what is the probability of type I error when in fact pt = 80. (c) Imaregression model, ¥; = B, + B1X; + 1 is equal to the mean of estimated ¥;.(3) 3(a) Consider the following simple regression model Price = By + B: Assess + u Where, Price is the housing price Assess is the assessment of housing price. The estimated equation is Price = -14.47 + 0.976Assess t = (16.27) (0.049) n= 88, SSR = 16564451, 1° = 0.820 (i) How will you test the constraints f; = 1 and By = 0 in the above regression if you are given the SSR in the restricted model as 209448.99? Conduct the necessary test(s) at 1% level of significance and give your conclusion? (3) (ii) Suppose now that the estimated model is Price = Bo + Bi Assess + Bx Lotsize + Bs Sqrft + Bs Bdrms + 1 Where Lotsize = the size of the lot Sqrft = the square footage Bdms = the number of bedrooms The R? from estimating this model using the same 88 houses is 0.829. Test at 1% level of significance that all partial slope coefficients are equal to zero. (2) (b) Let X ~ N(j1, 6”), Consider two independent random samples of observations on X. The samples are of size m and m2 which means X; and X, respectively. Two are proposed @) Check whether these estimators are unbiased and calculate their variance. (©) For each of the following pairs of dependent (Y) and independent variables (X), pick the most appropriate functional form. Explain the reason for your answer :(6) (i) | Y=demand for food, X = price of food Gi) Y = AFC of production, X = output (iii) Y = Population in India, X = Time 4(a)_ In a regression of average wages (W) on the number of employees (N) for a random sample of 30 firms, the following results were obtained : © Regression 1:W=7.5 + 0.009 t =(16.10) Econometrics By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Regression2:%= 0.008 + 782 t =(14.43) (76.58) R?=0.99 () How would you interpret the two regressions ? (ii) What might be the reason for transforming regression 1 into regression 2? What assumptions has been made about the error variance in going from Regression | to Regression 2? iii) Can you relate the slopes and intercepts of the two models (iv) Can you compare the R? of the two models ? Give reasons. (b) The thickness of the graph paper (measured in GSM) used during examinations should be such that it does not tear off easily while plotting a graph. Let 1p denote the true average thickness of the new type of graph paper under consideration. The true average thickness of graph paper should be greater than or equal to 20 GSM for it to be acceptable for all practical uses. A random sample of size n is drawn from a population with normal distribution. What conclusion is appropriate in each case? GB) @ 15, t =3.2,a=0.05 Gi) 9,t=18,a=0.01 Gil) n=24,t=-02 (c) Suppose that earnings of individuals are dependent on whether they are skilled workers and their work experience over the years. ©) (i) Define dummy variables to capture whether workers are skilled or not. Take workers being unskilled as the reference category. (ii) Develop a model which is linear in parameters that shows earnings of an individual as a function of work experience and whether they are skilled. Interpret your model. (ii) Now assume that there is an interaction between skill of the workers and their work experience. How would the model in (ii) change. Interpret the new model. 5(a) The results of a logarithmic regression of demand for food on price and personal disposable income is given as : InQ, = 2.34 — 0.31InP; + 0.45In¥, + 0.651nQ,-+ se (0.05) 0.20) @.14) n=50,R?=0.90,d=1.8 where, Q= food consumption per capita P = food price Y = real per capita disposable income (i) Just by looking at the estimated regression, do you suspect serial correlation in it? (ii) Which test do you use to confirm your suspicion and why? Econometrics By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in (iii) Outline the steps of the above mentioned test and provide a conclusion on the basis of your calculations. (b) Suppose you are given the following regression : 6) ¥, = Bo + BX; + BAX? + ty Do you think the model suffers from multicollinearity? If yes what are the possible remedies of the problem? (©) State and prove the minimum variance property of the slope coefficient in a two variable regression model. (6) 6(a) Consider the following models : 6) Model I: In¥ = ay + ainX} + uj Model I: In¥; = fy + BylnX; + uj Where ¥’ = w,¥; and X} = w,X; , the w’s being constants. (i) Establish the relationships between the two sets of regression coefficients and their standard errors. (ii) Is the R? different between the two models? (b) Suppose the CLRM applies to Y; = B2X; + €s, (i) Find the slope coefficient in the regression of Y on X (ii) Suppose now we have a regression of X on Y, X; = y2X; + vi Is slope coefficient of regression of X on Y an inverse of slope of regression of Y on x. 4) (©) Using data on compensation per employee in thousands of dollars (COMP) and average productivity in thousands of dollars (PROD) for a cross section of 50 firms for the year 1958, the following regression results were obtained (t ratios in parentheses) COMP, = 1992.35 + 0.233PROD; t 2.1275) (2.333) R? = 0.5891 Since the cross sectional data included heterogeneous units, heteroscedasticity was likely to be present. The Park test was performed and the following results of auxiliary regression were obtained : Ine? = 35.817 — 2.8099PROD, t — =(0.934) (0.667) 0595 (i) Use the result of auxiliary regression to check if the model indeed suffers from heteroscedasticity, perform the test at 5% level of significance. (ii) What could be the possible remedies of heteroscedasticity? ) 7(a) The following model was estimated for United States from 1958 to 1977: (8) i 1 ¥, = 10.078 — 10.337D, — 17.549 (3) + 38.173D, () se = (1.4204) (1.6859) (8.3373) (9.399) R? = 0.8787 Econometrics 5 By Dheeraj Suri, 9899-192027Prime Academy, www.primeacademy.in Where, Y = year-to-year percentage change in the index of hourly earnings X = percent unemployment rate D =I for 1958-1969 =O if otherwise (i) Show the Phillips curve for two periods separately. (ii) Are differential intercept and slope coefficients statistically significant? Whaat does this suggest ? (iii) Interpret the regression. (b) Two models for Engel expenditure function are estimated 6) Model: ¥, = 1087.930 + 0.077X, t = (25.58) (21.64) R?=0.350 F=468.645 Model: ¥; = 4005.077 + 0.3381/X; t = (19.259) (20.816) where Y, = expenditure on food in rupees X. = expenditure in rupees (i) Interpret all coefficient value of the two models. (ii) Are the sign of the coefficients in the two models contradictory? (iii) Can we compare the results of the two models? (iv) Diagrammatically show the sample regression function in the above model 0.333 F=433.310 (©) Consider the following fitted regression model. Standard error is given in parenthesis Y, = —9.6+2.1X,+0.1X, R?=0.92 se= (8.3) (1.98) (1.77) (i) Do you see any problem with this regression? (ii) Tfyes, what is the problem? (iii) Outline the steps for performing an auxiliary regression to detect the presence of problem in the regression. For Full Course Video Lectures of All Subjects of Eco. (Hons), B Com (H), BBE, MA Economics, NTA UGC NET Economics, Indian Economie Service (IES) Register yourself at www.primeacademy.in Dheeraj Suri Classes Prime Academy 9899192027 Econometrics By Dheeraj Suri, 9899-192027