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ASSIGNMENT No. 1
(Units: 1–4)
Course: Applied Econometrics (2703) Semester: Autumn, 2011
Level: M. Phil Economics Total Marks: 100
Pass Marks: 50
Note: Attempt all questions.
Q. 1 Suppose Y1, .............., YT is sample of observations from a 
population an alternative to the least squares estimator of β is the easy estimator but that 
are not independent such that
population an alternative to the least squares estimator of β is the easy estimator but that are not independent such that 
(a) Show that bE is a linear estimator.
(b) Show that bE is an unbiased estimator.
(c) Find the variance of bE. (20)
Q. 2 Using the statistical model y = Xb + e and e ~ N (0, s2 IT) and the following array of data
(a) Find 
(b) Find 
(c) Give an interpretation of the quantities you have calculated. (20)
Q. 3 Given the following Keynesian demand for money functions and the data given in Table 9.6 pp. 316 (Judge)
(a) Find least square estimates of β1, β2 and β3 in the linear equation and 
in the log linear equation and the corresponding estimated covariance matrix. Interpret the estimated 
in the log linear equation and the corresponding estimated covariance matrix. Interpret the estimated (b) Predict money demanded for (i) GNP = 1000 billion dollar and an interest rate of 12% (ii) GNP = 2000 billion dollar and an interest rate of 6% in both models and compare the results. (20)
Q. 4 (a) Use the data in table 12.1 (Judge) to estimate the following econometric consumption-income model
Where 
for war period 1941..........1946 and 
otherwise
for war period 1941..........1946 and otherwise (b) Let 
define a dummy variable that is 1 during non-war years and 0 during war years. Estimate by least square the following model and compare the result with (a).
define a dummy variable that is 1 during non-war years and 0 during war years. Estimate by least square the following model and compare the result with (a).
(20)Q. 5 Consider the following model showing the relationship between job vacancies (JV) and the unemployment rate (U).
Assume 
are independent 
random variables
are independent random variables (a) Use the data in table 16.4 to find least square estimates of 
and 
Construct a 95% interval for 
.
and Construct a 95% interval for . (b) Use the Durbin-Watson test to test the autocorrelation. In the light of this test what can you say about the original assumption about 
and the confidence interval found in (a).
and the confidence interval found in (a). (c) Estimate the model after correction for autocorrelation.
(d) Interpret the difference in the results of (a) and (c). (20)
ASSIGNMENT No. 2
ASSIGNMENT No. 2
(Units: 5–9)
Total Marks: 100 Pass Marks: 50
Q. 1 Consider the following model;
The endogenous variables 
and 
are private consumption and investment expenditures respectively in year t and 
is gross national expenditures in year t. While exogenous variables 
and 
are the government expenditures and weighted average of interest rate in year t respectively.
and are private consumption and investment expenditures respectively in year t and is gross national expenditures in year t. While exogenous variables and are the government expenditures and weighted average of interest rate in year t respectively.(a) Examine equation (I) and (II) and use the order condition to determine their identification status.
(b) Find out the following reduced form coefficients in terms of structural coefficients.
(c) Use the data in Table 18.2 chapter 18 (Judge) to obtain
(i) Least square estimate of equations (I) and (II)
(ii) Least square estimates of reduced form parameters.
(iii) 2SLS estimates of structural parameters of the equations (I) and (II) along with measures of precision (standard errors)
(iv) Report your result and comment on their statistical reliability and economic feasibility. (20)
Q. 2 Having the following consumption function:
Where is consumption, 
is normal real income. Assume that normal income is unobservable but satisfies the adaptive expectations hypothesis so that
is consumption, is normal real income. Assume that normal income is unobservable but satisfies the adaptive expectations hypothesis so that
Find out a moving average error formulation of the geometric lag via the Koyck transformation. (20)
Q. 3 Given the following non-linear model
(a) Use the yarn industry data in table 22.9 (Judge) to estimate 
and
.
and.(b) Graph the average cost learning curve. (20)
Q. 4 (a) Consider the AR (1) process in the following equation
Now define a new random variable 
and show that and have the same variances, covariances and autocorrelations. (10)
and show that and have the same variances, covariances and autocorrelations. (10) (b) Write notes on the following:
(i) Consequences of Heteroskedasticity
(ii) 2-Stage Least Square Method
(iii) Handling of Panel Data
(iv) Data Filtering
(v) Data Mining (10)
Q. 5 Use the data given in Judge 2001 on disposable income in table 21.9 and the data on consumption of nondurables in Table 21.11 to test whether disposable income and nondurable consumption are cointegrated. (20)
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