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Agec 313: Econometrics Question Paper

Agec 313: Econometrics

Course:Bachelor Of Agribusiness Management

Institution: Chuka University question papers

Exam Year:2013

CHUKA

UNIVERSITY

UNIVERSITY EXAMINATIONS
THIRD YEAR EXAMINATIONS FOR THE AWARD OF DEGREE IN BACHELOR OF AGRIBUSINESS MANAGEMENT
AGEC 313: ECONOMETRICS
STREAMS: AGBM Y3S2 TIME: 2 HOURS
DAY/DATE: WEDNESDAY 17/4/2013 1130 AM – 1.30PM
INSTRUCTIONS:

Answer all questions
Start each question on a new page
Do not write on question paper

QUESTION 1

Consider the following table which contains the bushels of corn per acre, amounts of fertilizers and insecticides both in pounds per acre from 2003 to 2012.

Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Bushels of corn per acre 60 66 69 72 78 87 90 102 111 120
Fertilizer per acre 9 15 18 21 24 27 33 36 39 48
Insecticides per acre 6 6 8 11 14 18 21 30 32 36

Suppose it is thought that the Bushels of corn depend primarily on fertilizer and insecticides use. A possible model for the data might be the linear regression model where the random errors are independent, normally distributed random variables with zero mean and constant variance.
(a) Showing your understanding of the terms, indicate the dependent and independent variables in the data above. [2 Marks]

(b) Using the method of least squares, determine the equation of the regression
line of Y on Xs and give an interpretation of the coefficient. [10 Marks]

(c) Compute the Variance Inflation Factor (VIF) and give its interpretations. [6 Marks]

(d) Differentiate between regression and correlation. [2 Marks]

QUESTION 2

(i) Explain the meaning and sources of the Autocorrelation, Multicolinerarity and
Heteroscedasticity? [11 Marks]

(ii) What is a distributed lag model? Algebraically, give the general form of a distributed model within infinite number of lags. [3 Marks]

(iii) Explain the drawbacks of ad hoc estimation method of distributed-lag models.
[6 Marks]

QUESTION 3

Consider the following structural model
d_t=ß_1+ß_2 w_t+ß_3 m_t+µ_lt w_t=a_1+a_2 d_t+a_3 n_t+µ_2t

Where d_t w_t m_(t ) and n_t are respectively the rate of price inflation, the rate of wage inflation, the
rate of wage inflation, the rate of growth of money supply and the unemployment rate.

(a) Which are the endogenous and exogenous variables of the system? [2 Marks]

(b) With definition of the same, determine if the structural equations are identified.
[3 Marks]

(c) What happens to identification if it is known a priori that ß_3=0 [3 Marks]

(d) Determine the reduced form equations for this model. [10 Marks]

(e) Why is it advantageous to use Two Stage Least Squares to solve simultaneous equations. [3 Marks]

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Agec 313: Econometrics Question Paper

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