UNIVERSITY OF BOTSWANA

END OF THE SEMESTER II EXAMINATIONS - MAY 2009

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COURSE NO: STA 384 DURATION: 2 HOURS DATE: MAY 2009

TITLE OF PAPER: ECONOMIC STATISTICS

SUBJECT: STATISTICS TITLE OF EXAMINATION: BA (SS)/BSC- YEAR III

ANSWER ANY FOUR QUESTIONS

USE OF CALCULATORS AND STATISTICAL TABLES ALLOWED

DO NOT OPEN THIS PAPER UNTIL YOU HAVE NO. OF PAGES

BEEN TOLD TO DO SO BY THE SUPERVISOR 2

 STA384: Econometrics Statistics- 2008/09

Answer any four questions

Question 1

(i) What is an index number? Explainthe importance of index numbers in interpreting economic
effects.

(ii) Discussthe use of orthogonal polynomialsin the determination of the trend component in a
time series.
(iii) Definea (covariance) stationary time series. Give an example of a stationary time series,
justifying how it is stationary.
(6+9+10 = 25 marks)
Question 2

Define and write brief notes and illustrate the followingconcepts:

(a) Indifference curve

(b) Multi-collinearity
(c) Budget constraint
(d) Income consumption curve
(e) Priceconsumption curve
(5+5+5+5+5 = 25 marks)
Question 3

(a) Giventhe followingdata model below

Yt =lO+t+sj,where t=4(i-1)+ j, corresponding to the /h quarter of the ith year

i,j = 1,2,3,4, s1 = -3, s2 = 1,s3 = 4, s4 = -2, wheres j = the seasonal index ofthe

/h quarter. Usingthe four-quarter centered movingaverage with weights given by ..!.[214]

8
obtain trend values and hence the deseanalized data.

(b) What conditions characterize consumer optimum? State and explain these in three different
ways.

(16+9 =25 marks)

Question 4

Briefly interpret the forecast function of the following processes:

(a) Yt =Yt-l +&t +0.5&t-l (b) Yt =l.lYt-l +&t

Derive the autocorrelation function (ACF)for model in (a) Isthe model stationary? What is the variance
of the error forecast for the model? What is the important contribution asthe forecast horizon k
increases?

(25 marks)

Question 5

Consider the demand and supply model,

qd =al +blP+Qy+ul

q s = a2 + b2P + u2 .

Where q =quantity (d =demand, s = supply).

P =price, Y =income, ul and u2 are stochastic disturbance terms.

(a) Assessthe identification of the demand and supply curves,with reference to both rank and
order condition.

(b) Is Ordinary LeastSquare (OLS)the best estimation procedure to use for the supply model? If
not, describe and justify an alternative procedure and explain how it can be usedto obtain
estimates of the parameters of the supply model.

(6+19 = 25 marks)

Question 6

(a) Discusswhy you would expect to encounter multi-collinearity and also discuss how you would
detect it in the context of any econometric model?

(13 marks)

(b) How do you remedy the multi-collinearity problem and what are the possible consequences?

(12 marks)

Endof examination paper!