Final Exam – Econometrics Muhammad Arqam Tariq

17U00590
Section II
Question 1
The following graph depicts the number of deaths in Beijing due to the Coronavirus starting from
January 22nd up to 10th May for the year 2020. The vertical axis represents the number of deaths
in Beijing due to the coronavirus and the horizontal axis represents the time frame (starting from
22nd January, 2020 up to 10th May, 2020).
Solution:
A) Date: on average, everyday from Jan 22nd to May 10th 2020, coronavirus deaths have been
increasing by 4.7019 keeping everything else constant.
April: On average, for the month dummy april, the coronavirus deaths increased by 95016.93,
holding everything else constant
Date-aprildummy: On average, after the april 1st, the coronavirus deaths in Beijing increased by
(4.701 – 4.3148)0.3862 holding everything else constant.
The data variable is highly significant according to the regression above and may give false results.
B) On average, an increase in temperature will cause decrease in corona virus deaths by 1.102,
holding everything else constant. However the t-stat is not significant.
C) Change in Coronavirus Deaths in Beijing = B0 + a1 coronadeaths in Beijing (t-1) + et
H0: a1 = 0 non stationary
H1: a1 < 0 stationary
Test-statistics = |-9.295| > |-2.889|
We reject null hypothesis, coronavirus deaths in Beijing is stationary
Change temperature – Beijing = B0 + a1 temp – Beijing (t-1) +et
H0: a1 = 0 non stationary
H1: a1 < 0 stationary
Test - statistics = |-2.536| < |-2.889|
We fail to reject null hypothesis, temperature in Beijing is non stationary
Question 2
Solution:
A: log(̂𝑤𝑎𝑔𝑒) = 2 + 1.4log (𝑒𝑥𝑝𝑒𝑟)
1 percent increase in number of years of experience would lead to 1.4 percent increase in wage
keeping everything else constant.
B: 𝑤𝑎𝑔𝑒 ̂ = 100 + 100 log(𝑒𝑥𝑝𝑒𝑟)
1 percent increase in number of years of experience would lead to dollar 0.1 increase in wage
keeping everything else constant.
C: log(̂𝑤𝑎𝑔𝑒) = 4 + 0.06𝑒𝑥𝑝𝑒
An increase of 1 year of experience would lead to the increase of wage by 6 percent keeping
everything else constant.
Question 3 (26 marks): Using data from Pakistan Demographic and Health Survey (2012-13) of
11,274 women—which includes a measure of autonomy of the women surveyed (a scale from 0-
10, 10 being the most autonomous), a dummy for husband’s education greater than primary school
(husb_edu), and a dummy for a Rural location (rural)—we estimate the following model:
Solution:
A: location: On average, women in rural areas have less autonomy than women in urban areas by
0.400
Husband education: On average, women whose husbands have more education than primary
schools have greater autonomy than women whose husbands have lesser education than primary
schools by the factor of 0.15.
As P-value for both the independent variables is less than 0.05, Null hypothesis is rejected.
Both Variables are significant
B: autonomy = B0 + B1husband – educ – B2 rural
Autonomy = 1.986 + 0.159husband – educ – 0.4 rural
1) Husband has primary education = 1.986+ 0.159(0)
= 1.986
2) Husband has more than primary education = 1.986 + 0.159(1)
= 2.145
C:
Question 4:
Solution
H0: Bw = Bsp = Bs = 0
H1: Bw ≠ Bsp ≠ Bs ≠ 0
N = 64, q = 3, K = 5, R2 R = 0.2859 R2UR = 0.4454
F-stat = [(R2UR - R2 R)/ 1 - R2UR] x [(n-KUR -1)/q]
= (0.4454 – 0.2859 / 1 – 0.4454) x (64 – 5 – 1 / 3)
F-stat = 5.54
f-stat > f-critical
f-stat = 5.56 > 2.76
hence the null hypothesis is rejected which means seasonality adds significant value to our model
and help predict car sales.

Question 5 (9 marks): Suppose an econometrician gathers information on the number of

cigarettes smoked by students in local universities in Lahore. The econometrician gathers data
from 100 students on the number of cigarettes smoked per day (smoke), the education of the person
in years (educ), the income of the person (income) in rupees thousands, and two dummy variables:
if the person lives in an area in which restaurants ban smoking (restban) and if the person is a
female (female).
Solution:
A: Smoke = B0 - B1educ + B2Income - B3RestBan + B4Female + u
B: Smoke = B0 - B1educ + B2Income - B3RestBan +B4Female + B5 RestBan,Income + u