Problem#1: Comment on the normality of following series, X, Y, Z

and W.

Problem#2: Explain the following tests and conclude normality of

‘wage’ series.
Series # wage
Normality Test
Statistic t-Test P-Value
Skewness 1.8481 27.120 5.7750e-162
Excess Kurtosis 4.8366 35.514 3.0089e-276
Jarque-Bera 1990.1 .NaN 0.00000
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Problem#3: Given the regression output check whether the series
“Prices” has any seasonal pattern and/or time trend.
Modelling Prices by OLS
The estimation sample is: 1957(1) - 1975(4)

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 Coefficient Std.Error t-value t-prob Part.R^2
Constant 44.2680 4.415 10.0 0.0000 0.5861
Seasonal -1.24312 4.617 -0.269 0.7885 0.0010
Seasonal_1 -0.325241 4.614 -0.0705 0.9440 0.0001
Seasonal_2 -0.159989 4.612 -0.0347 0.9724 0.0000
Trend 1.25580 0.0744 16.9 0.0000 0.8004

Problem#4: Following is the output of an ANCOVA model, logwage is

regressed on dummies ‘female’, ‘non-white’ race ‘Union’member
worker with given experience and education in years. Interpret
the model.
Modelling Lwage by OLS-CS
The estimation sample is: 1 - 1289
Coefficient Std.Error t-value t-prob Part.R^2
Constant 0.910681 0.07476 12.2 0.0000 0.1037
female -0.255574 0.02896 -8.82 0.0000 0.0573
nonwhite -0.133481 0.03719 -3.59 0.0003 0.0099
union 0.162905 0.04803 3.39 0.0007 0.0089
education 0.0997177 0.004821 20.7 0.0000 0.2502
exper 0.0127677 0.001172 10.9 0.0000 0.0847
female*union 0.0217129 0.010394 2.088 0.0028 0.0832

Problem#5: The relationship between nominal exchange rate and

relative prices. From the annual observations from 1980 to 1994,
the following regression results were obtained, where Y =
exchange rate of the German mark to the U.S. dollar (GM/$) and X
= ratio of the U.S. consumer price index to the German consumer
price index; that is, X represents the relative prices in the two
countries:

Y^ t =6 . 682− 4 . 31 ln X t
( 0 .002) ( 0. 001)

Multiple−R=0 .9

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P-values are given in the parenthesis, Interpret this regression.
Calculate goodness of fit for the above model and interpret.
Calculate the ‘X’ elasticity of ‘Y’, provided the mean value of
‘Y’ is 6.5.
Problem # 6: Consider the following Transcendental Production
Function (TPF).

β2 β3 β 4 Lt + β5 K t
Q t =β 1 Lt K t e
Where Q, L, and K represent output, labor, and capital
respectively.
a) Under what conditions the TPF can be reduced to regular Cob-
Douglas production function. Discuss the nature of these
conditions and how the validity of these conditions can be
checked/verified.
b) From above function compute output-capital elasticity.

Problem # 6: A researcher estimates following two models of

private savings (PSAV) on public savings (PUBS), per capita real
income (PCI), remittances (REM), dependency ratio (DPN), first
information report (FIR), inflation (INF) and change in gold
prices (GOLD). a) Fill in the missing statistics in the following
OLS outputs of Model#1.

b) Model#2 is a restricted model. Identify the restrictions and

calculate F test for linear restrictions. Verify that
restrictions are valid or invalid. (At 5% level of significance,
CV for linear restriction F test = 4.26)

SUMMARY Model#1

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OUTPUT

Regression Statistics

Multiple R 0.980

R Square

Adjusted R Square 0.953

Standard Error 1.221

Observations 29

ANOVA

Significance
df SS MS F F

Regression 859.700 0.000

Residual 35.784

Total 895.484

Standard
Coefficients Error t Stat P-value

Intercept 16.278 12.412 0.202

PUBS -0.549 0.233 0.027

PCI 0.000 0.000 0.000

REM 0.644 0.371 0.096

DPN -0.315 0.107 0.007

SUMMARY
OUTPUT Model#2

Regression Statistics

Multiple R 0.977

R Square 0.955

Adjusted R Square 0.950

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Standard Error 1.269

Observations 29

ANOVA

Significance
df SS MS F F

Regression 3 855.224 285.075 177.020 0.000

Residual 25 40.260 1.610

Total 28 895.484

Standard
Coefficients Error t Stat P-value

Intercept 33.361 7.836 4.257 0.000

PUBS -0.309 0.194 -1.591 0.124

PCI 0.000 0.000 4.130 0.000

DPN -0.469 0.063 -7.474 0.000

Problem # 7: Explain the procedure how linear and log-linear

forms can be compared.
Problem # 8: An econometrician regresses gross private investment
(gpi) on gross private savings (gps). From the output below
interpret statistics in bold.
The estimation sample is: 1959 - 2007
Coefficient Std.Error t-value t-prob
Constant -78.7210 27.48 -2.86 0.0062
gps 1.10740 0.0291 38.1 0.0000
Sigma 114.868; RSS 620149.806; R^2 0.968607 ; F(1,47) =
1450 [0.000];Adj.R^2 0.96794 ; AIC 12.3654; se(gpi) 641.526

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