1. Estimate the following FD model, where FD is financial development: In FDt = a +...

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1. Estimate the following FD model, where FD is financial development: In FDt = a + 1 In Tot + 2 In Rt + 3 In Yt + &t TO = trade openness R = interest rate Youtput (GDP per capita) (1) From the Eviews result, write down the estimation equation together with the standard error in bracket parentheses below the coefficients. 2. What is the potential econometric problem that you suspect for Equation (1)? 3. Detect any econometrics problem you suspect using an appropriate test. Is there any problem? 4. If got problem, rectify / overcome the problem using an appropriate method. If no problem, answer question (5). 5. Write down the final equation with the standard error in bracket parentheses below the coefficients, and interpret whether TO, R and Y are statistically significant determinants of FD. 1. Estimate the following FD model, where FD is financial development: In FDt = a + 1 In Tot + 2 In Rt + 3 In Yt + &t TO = trade openness R = interest rate Youtput (GDP per capita) (1) From the Eviews result, write down the estimation equation together with the standard error in bracket parentheses below the coefficients. 2. What is the potential econometric problem that you suspect for Equation (1)? 3. Detect any econometrics problem you suspect using an appropriate test. Is there any problem? 4. If got problem, rectify / overcome the problem using an appropriate method. If no problem, answer question (5). 5. Write down the final equation with the standard error in bracket parentheses below the coefficients, and interpret whether TO, R and Y are statistically significant determinants of FD.

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1 Estimation of the FD model In FD a 1 In TO 2 In R 3 In Y E Estimated equation In FD 2345 0263 In TO 0087 In R 0422 In Y 0102 0035 0029 0051 2 Potent... View the full answer