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What is the interpretation of the estimated coefficient

Assignment Help Econometrics
Reference no: EM132249551

Assessment Information

This assignment is designed to assess learning outcomes:

1. Demonstrate an understanding of concepts and tools relevant to econometrics
2. Apply classical econometrics methodology
3. Interpret and analyse statistical results

Answer the following questions, providing full details and discussion:

You have been asked by the Government to investigate determinants of income inequality. CW2019.gdt file contains cross-sectional data for 40 countries.

Variable name

Description

GINI

The Gini coefficient ranges from 0 to 1. 0 indicates perfect equality.

GROWTH

The growth rate of GDP in percentages.

EDUCATION

The secondary school enrollment as percent of age group. It ranges from 0% to 74%.

You are expected to use the following models:

Model 1. GINI = f(GROWTH)
Model 2. GINI = f(GROWTH, EDUCATION)

Both models should be estimated with a constant. Present regression output for each model above.

1. Can we omit GROWTH variable in Model 2?

This requires you to: state the null and alternative hypotheses, determine a critical value at 10% significance level, calculate the F statistic and present your decision.

2. Based on the Ramsey's RESET test (squares only version), is Model 2 misspecified?

This requires you to: state the null and alternative hypotheses used, determine a critical value at the 1% significance level; calculate F statistic and present your decision.

3. Are the residuals from Model 2 normally distributed?

This requires you to: state the null and alternative hypotheses, determine a critical value at 10% significance level, calculate the Jarque-Bera statistic and present your decision.

4. What is the interpretation of the estimated coefficient for GROWTH in Model 2?

5. Are the signs of the GROWTH and EDUCATION estimated coefficients in Model 2 in line with the expectations based on the theory? Justify your answer with some academic references.

6. How could those models be improved? Illustrate your answer with reference to the relevant academic literature. 500 words maximum.

Attachment:- Coursework.rar

Verified Expert

Stepwise regression analysis was widely used to determine the significant predictors of dependent variable. in order to know the combination of independent variables which significantly influences the dependent variable, we need to include the independent variable one by one in the regression model. the insignificant variables has to be removed from the model and replaced by new independent variable.

Reference no: EM132249551

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len2249551

3/6/2019 9:16:02 PM

• The University wants you to do your best. However, we know that sometimes events happen which mean that you can’t submit your coursework by the deadline – these events should be beyond your control and not easy to predict. If this happens, you can apply for an extension to your deadline for up to two weeks, or if you need longer, you can apply for a deferral, which takes you to the next assessment period (for example, to the resit period following the main Assessment Boards). You must apply before the deadline. You will find information about the process and what is or is not considered to be an event beyond your control

len2249551

3/6/2019 9:15:37 PM

The assessment must be submitted by 9. No paper copies are required. You can access the submission link through the module web. • Your coursework will be given a zero mark if you do not submit a copy through Turnitin. Please take care to ensure that you have fully submitted your work. • Please ensure that you have submitted your work using the correct file format, unreadable files will receive a mark of zero. The Faculty accepts Microsoft Office and PDF documents, unless otherwise advised by the module leader. • All work submitted after the submission deadline without a valid and approved reason (see below) will be given a mark of zero.

len2249551

3/6/2019 9:15:29 PM

This assignment is designed to assess learning outcomes: 1. Demonstrate an understanding of concepts and tools relevant to econometrics 2. Apply classical econometrics methodology 3. Interpret and analyse statistical results This assignment is an individual assignment. Criteria for Assessment • Note that your work must be word processed using Equation Editor or equivalent where appropriate. • Marks will be deducted if the work is not organised or untidy. • Provide FULL explanations and details for full credit. The word count is 500 words with respect to Question 6. There will be a penalty of a deduction of 10% of the mark (after internal moderation) for work exceeding the word limit by 10% or more. The word limit includes quotations and citations but excludes the references list.

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