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Econ 331 Econometrics 1 Question Paper

Econ 331 Econometrics 1

Course:Bachelor Of Science In Economics And Statistics

Institution: Chuka University question papers

Exam Year:2012

CHUKA UNIVERSITY

COLLEGE

UNIVERSITY EXAMINATIONS

THIRD YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF SCIENCE (ECONOMICS & STATISTICS) &
BACHELOR OF ARTS (ECONOMICS & SOCIOLOGY)

ECON 331: ECONOMETRICS II

STREAM: B.SC. (ECON & STATS) & TIME: 2 HOURS
B.A. (ECON & SOCI) Y3S2
DAY/DATE: WEDNESDAY 13/12/2012 11.30 A.M – 1.30 P.M.
INSTRUCTIONS:

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

Question 1

Consider the following table which contains the sales prices (per hour) of 5 holiday cottages in Masai Mara, Kenya, together with the age and the livable area of each cottage.

Age in years 36 37 47 32 1
Sales Price per hour 745 895 442 440 1598
Area in meters 66 68 64 53 101

Suppose it is thought that the price obtained for a cottage depends primarily on the age and livable area. A possible model for the data might be the linear model where the random errors are independent, normally distributed random variables with zero mean and constant variance

(a) Showing your understanding of the termed, 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 X and give an interpretation of the coefficients. [10 marks]

(c) Compute the variance and standard errors of the estimates. [10 marks]

(d) Compute the coefficient and multiple determination and the adjusted R2 for the model and give its interpretations. [6 marks]

(e) What is your understanding of the term partial correlation coefficient? [2 marks]

Question 2

(i) While showing your understanding of the term econometrics, indicate why econometrics is a separate discipline. [10 marks]

(ii) State sequentially the methodology of econometrics in research. [4 marks]

Question 3

The most commonly used regression line is the least squares regression line.

(a) Why is it called least squares regression line? [4 marks]

(b) Does the regression of Y on X and the regression of X on Y ever produce the same regression line? If so, under what circumstances? [4 marks]

(c) Distinguish between the following terms as used in econometrics:

(i) Regression and correlation [4 marks]

(ii) Functional relations and statistical relations [4 marks]

Question 4

(i) What is a distributed lag model? [2 marks]

(ii) Algebraically, give the general form of a distributed model with infinite number of lags. [2 marks]

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

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Econ 331 Econometrics 1 Question Paper

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