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Tutorial 1

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7 views1 page

Tutorial 1

Uploaded by

Alireza Kafaei
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MONASH UNIVERSITY

ECONOMETRICS AND BUSINESS STATISTICS

Applied Econometrics
Tutorial 1

1. Describe the assumptions of the classical linear regression model. What are the
implications for the properties of the OLS estimator if each one of these assumptions is
violated?

2. Let the following linear model given by 𝑦 = 𝛽𝑥 + 𝑒 , 𝑖 = 1, …, N. Two estimators


𝑏 and 𝑏 of 𝛽 are defined by

𝑏 =∑ 𝑦 ⁄∑ 𝑥 and 𝑏 = ∑ 𝑦 𝑥 ⁄∑ 𝑥 .

Show that
a. both 𝑏 and 𝑏 are unbiased estimators of 𝛽 (if we assume that 𝐸(𝑒 ) = 0 )
b. the variance of 𝑏 is greater than that of 𝑏 (if we treat the 𝑥 as given, rather
than random). Why should you expect this?

3. Page 133, Ex. 3.1.

4. Practice on EViews:
a. Use the food.wfl dataset to estimate a simple regression of food expenditure on
income. Define the marginal propensity to spend income on food, and then use
your output to estimate this propensity. Then define the elasticity of food
consumption with respect to income, and estimate this elasticity at the sample
means. Interpret the coefficient in economic terms: what can you conclude from
the analysis?
b. Use the br.wfl dataset to provide a scatter plot of price vs square feet, and
comment on whether you think that a linear model (of price regressed on house
size in square feet) might be appropriate for this data, providing some rationale
for your answer.
c. Use the same data set as in b. to estimate a quadratic model of house prices as a
function on the squared values of house size. Define and interpret the marginal
effect of the independent variable. What can you conclude from the analysis?
d. Use the same dataset as in b. to estimate a log-linear model. Define and interpret
the marginal effect of the independent variable: did your conclusion change
from part c? Why?

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