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Xeq/Cec 401: Introduction To Econometrics I Question Paper
Xeq/Cec 401: Introduction To Econometrics I
Course:Bachelor Of Economics And Bachelor Of Arts
Institution: University Of Nairobi question papers
Exam Year:2012
University of Nairobi
Special/Supplementary Examinations 2011/2012
Fourth Year Examinations for the Degrees of Bachelor of Economics and Bachelor of Arts
XEQ/CEC 401: Introduction to Econometrics I
Date: November 7, 2012 Time: 2.00.P.M – 4.00.P.M
Instructions:
i. Students are provided with some statistical tables and formulae that they might find useful.
ii. Answer question ONE and any other TWO questions.
Q1. Climate variables are hypothesized to affect agricultural output. Moses obtained the following data to test this hypothesis in an 8 year period research.
Output (Y) 55 65 80 75 70 50 60 65
Rainfall (R) 19 17 21 17 19 18 20 21
Temperature (T) 49 58 55 58 55 49 46 46
a) Fit a multiple regression line relating output (kg) to rainfall (inches) and temperature (0F) and interpret your results. [9 marks]
b) Compute the fitted values and residuals for each observation and verify that the sum of residuals is approximately equal to zero. [6 marks]
c) On average, how elastic is output with respect to temperature? [4 marks]
d) Calculate the multiple coefficient of determination for this regression model and interpret your results. [5 marks]
e) Test the hypothesis that the partial coefficients are jointly significant at the 1% level of significance. [6 marks].
Q2. a) i) What is econometrics? [2 marks]
ii) With the use of appropriate examples, discuss the main goals of econometrics. [6 marks]
b) Discuss the importance of model specification with reference to achievement of the goals that you have identified in a) ii) above.[4 marks]
c) Model misspecification is often a major problem in econometrics. Discuss the main causes of misspecification and the most common specification biases. [8 marks]
Q3. The following model was obtained by a researcher when investigating the response of demand of automobiles to prices for am period of 6 years.
Y = 5807 + 3.24X r^2 = 0.22
(0.45) (1.634)
The t values are provided in parenthesis.
a) Test the hypothesis that the intercept and the slope are equal to zero at the 5% level of significance. [6 marks]
b) Compute the elasticity of demand when the price is equal to 10 and comment on your results. [4 marks]
c) Interpret your r^2 and explain how it relates to the slope of the regression line. [4 marks]
d) Establish a 95% confidence interval for the population slope. [6 marks]
Q4. Consider the following data:
Y 15 10 14 8 3
X 1 2 3 4 5
a) Calculate the simple correlation coefficient and interpret your results. [5 marks]
b) Compute the rank correlation coefficient and interpret your results. [5 marks]
c) Compute the coefficient of determination for the relationship between Y and X and interpret your results. [3 marks]
d) Compute the adjusted R squared. [2 marks]
e) Test for the significance of the coefficient of determination in c) above assuming a 5% level of significance. [5 marks]
Q5. a) With the use of appropriate examples, explain what you understand by the term multicollinearity. [2 marks]
b) Discuss the main consequences of multicollinearity in an econometric relationship. [8 marks]
c) OLS estimators are BLUE with the use of appropriate examples, discuss clearly what you understand by this statement. [10 marks]
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