Do the test of endogeneity of cigs in income equation

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Reference no: EM133636471

Questions

1. Do the test of endogeneity of cigs in the income equation. (You may use all exogenous variables as instruments here).

2. Now estimate the income equation by 2SLS and compare the estimate β1 with the OLS estimate. Which estimation method is appropriate? Answer with the test results.

3. Estimate the effect of age on smoking. Is it significant? If the age is up to two years, how does it affect smoking?

4. Define the Phillips curve equation, the Static Phillips curve model (relation between inflation and unemployment). Estimate the model with OLS. Report the results. Do the results make sense?

5. Do the test for autocorrelation and explain your findings. If there is autocorrelation, estimate the model after correcting for it and explain the results.

6. Now estimate an expectation augmented Phillips Curve: Δinf = β0 + β1unem + et and estimate the tradeoff between rate of inflation and unemployment rate. Is it significant?

7. Collect the data for the interest rate (any annual rate of your choice) for these years and use it and the time trend (t) as the other exogenous variables (or instrumental variables). Now re-estimate the model with these additional explanatory variables and test whether there is a tradeoff between inflation and unemployment?

8. Now estimate the model using the correction for this endogeneity (if it exists), i.e., use 2SLS or LIML and report the results. Is the trade off different from part c.

9. Set up and estimate the regression model: uratet = α + βvratet + ut. Does the sign and magnitude of the slope parameter make sense? Explain the estimated coefficients. What are the possible problems with this estimation?

10. You may guess both variables are nonstationary. Apply the appropriate test for unit roots here. Write out the appropriate equations and describe the null hypotheses and the alternative hypotheses for this test. (I need the equations for this set up here)

11. Now compute the regression residual from number 10 and test for unit root for the regression residual again. If there is no unit root then urate and vrate are cointegrated. Explain what it means?

12. Perform a Chow test for structural difference between male and female. Do you see significant differences in estimated coefficients of the model for male and the model for female?

Reference no: EM133636471

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