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    Kalimanshi Nsakaza
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    Econometrics Question Papers

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    2022 ECN 3311 test 2

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    Econometrics Question Papers

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    34 views4 pages

    2022 ECN 3311 Test 2

    Uploaded by

    Kalimanshi Nsakaza
    Econometrics Question Papers

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
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    UNIVERISTY OF ZAMBIA - ECONOMICS DEPARTMENT ECONOMETRICS (ECN3311) TEST 2 Instructions This paper has one section. Answer ALL questions There are three questions in this paper. Each question has a total of 20 marks. + Time allowed: 1:15 hour + Use your own answer sheet Calculators are allowed QUESTION 1 PwC's 2019 Zambia Insurance Industry Survey analysed the risks and challenges facing Zambia's insurance industry over the short, medium and long-term. The survey, the first ofits kind by PwC, is based on information obtained from a questionnaire sent to 33 insurance companies currently operating in Zambia as well as meetings with some of key players in the sector. The survey was conducted between August and October 2019, with 19 out of 33 insurance companies responding, In financial inclusion, access to. and use of insurance is hypothesised to be influenced by the following factors financial literacy, Income, age, educational level and represented by the following model Pr*Baks + Pa¥s + BuXs + BsXe + 8, where & isthe error term, y is use/aceess to insurance services, Bs are the parameters, and Xs are the independent variables Using your econometrics knowledge, answer the following questions ') For some reason, the PwC survey does not have data on financial literacy (x, ) and you want to run the regression of the above model using the Pwe survey. What problem would you face in your estimation if you omit this variable? [5 marks] U)) Using correct expressions, demonstrate and discuss how this problem (in above question) can be reduced or eliminated from your estimation, [5 marks] fi) Using your solution in (i), rewrite the initial regression model, y = fx, + BaXz + BaXs + BsX4 +8 [3 marks] 'v) Compare the following values between those you might obtain in the initial regression and those from your solution (refined regression): bs , beg and by Standard errors and t statistics for bs , bs and bs ;r® for the rhddel: and p, and fy 15 marks} [2 marks] v) What would happen if your solution in (ii) is weak? QUESTION 2 Model comparison is very important in econometric analysis. Mr Homoscedasticity Mbewe, a Senior Researcher at the Ministry of Finance was conducting an analysis into ik factors that influence consumer loan default in Zambia. He obtained the following i yD: ‘ restricted model (model 1): measures fhe ca reed os og ° FS pete \eatae costtrent| ey em pioymert) — g.0¢ os a J | Reo oS Finanete enone od / Variable 7 [ = Coefficient Model Values , 008 oo RSquared=-066 Income 1 305 o08 W500] Marital status oor 010 ~ | Model 2: The unrestricted model has additional variables of ‘Employment status’ with -0.08 p-value and 0.31 coefficient value; and ‘Financial literacy’ with 0.23 p-value and 0.013 coefficient value. The sample size (n) of his study was 542 and he used 5% level of significance in his estimation i) Using the F-test, demonstrate how Mr Homoscedasticity can conduct his model ‘comparison (between restricted and the unrestricted models) [5 marks] Given the information below, comment on the model fit and compare your [5 marks] ii) conclusions to those under the F-test conducted in (i) | Model 1 Model 2 1 [Criteria fac S~S~«~COODZ “406853—C—C~

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