(a) Consider the estimated results of an investment model based on annual time series data ove...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
(a) Consider the estimated results of an investment model based on annual time series data ove 1950-2018 as follows: log FDI, = 6.48+0.57 log Y, -0.13 log R, +1.82P, +0.05 log FDI, DW= 1.76 t-values (1.75) (4.75) (2.17) (1.94) (2.5) where FDI is foreign direct investment; Y is national output measured by Gross Domestic Product; R is domestic interest rates; P is total population; subscripts and 1-1 are current year and previous one year respectively; and t values are in parentheses, test the hypothesis at 5% level of significance that the estimated regression model is free from the problem of serial correlation. (5 marks) (b) Consider a log linearized Cobb Douglas production function logQ=B₁ + B₂ log K + B, log L+u where Q is output; K is capital; and L is labour. (i) Derive a restricted model based on the hypothesis that the model exhibits constant returns (2 marks) to scale. (ii) If the values of the Residual Sum of Squares (RSS) for the restricted and unrestricted models are 17.2 and 16.3 respectively over a sample of 53 firms, test the hypothesis at 5% level of significance that the estimated model exhibits constant returns to scale. (5 marks) (a) Consider the estimated results of an investment model based on annual time series data ove 1950-2018 as follows: log FDI, = 6.48+0.57 log Y, -0.13 log R, +1.82P, +0.05 log FDI, DW= 1.76 t-values (1.75) (4.75) (2.17) (1.94) (2.5) where FDI is foreign direct investment; Y is national output measured by Gross Domestic Product; R is domestic interest rates; P is total population; subscripts and 1-1 are current year and previous one year respectively; and t values are in parentheses, test the hypothesis at 5% level of significance that the estimated regression model is free from the problem of serial correlation. (5 marks) (b) Consider a log linearized Cobb Douglas production function logQ=B₁ + B₂ log K + B, log L+u where Q is output; K is capital; and L is labour. (i) Derive a restricted model based on the hypothesis that the model exhibits constant returns (2 marks) to scale. (ii) If the values of the Residual Sum of Squares (RSS) for the restricted and unrestricted models are 17.2 and 16.3 respectively over a sample of 53 firms, test the hypothesis at 5% level of significance that the estimated model exhibits constant returns to scale. (5 marks)
Expert Answer:
Answer rating: 100% (QA)
a To test the hypothesis that the estimated regression model is free from the problem of serial correlation we can use the DurbinWatson DW statistic T... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
Consider the production function Q = 100L.5K.4. Suppose L = 1 and K = 1 so that Q = 100. a. If L is increased by 1 percent, that is, to L = 1.01, with capital unchanged, what is the resulting...
-
Consider the production function Q = 20 K1/2 L 1/2. The firm operates in the short run with 16 units of capital. a. The firms short-run production function is Q = __________________. b. The average...
-
Consider a linear regression model where y represents theresponse variable and d1 and d2 are dummy variables. Themodel is estimated as = 160 + 15d1 + 32d2. a. Compute for d1 + 1 and d2 + 1. b....
-
Katz Hat Shop received a shipment of hats for which it paid the wholesaler $2,970. The price of the hats was $3,000, but Katz was given a $30 cash discount and required to pay freight charges of $50....
-
Suppose that the government is debating whether to spend $ 100 billion today to address climate change. It is estimated that $ 700 billion of damage will be averted, but these benefits will accrue...
-
It is well known that wind makes the cold air feel much colder as a result of the wind chill effect that is due to the increase in the convection heat transfer coefficient with increasing air...
-
Which of the following statements is true? a. Financial statements report the value of employee knowledge and skills. b. Turnover and absenteeism are costly. c. Outsourcing of HRM and payroll...
-
Apple also offered a 32GB version of the iPhone 4 at $299. Variable costs for that version were $250. Besides its higher price, explain why Apple would encourage customers to purchase the 32GB over...
-
B. Diversiones Describa las actividades de las personas de la imagen. Para qu se usa la estufa? Se usa la estufa para cocinar.. En qu se prepara el caf? Se prepara el caf en Use el presente...
-
Ferris Company has an old machine that is fully depreciated but has a current salvage value of $5,000. The company wants to purchase a new machine which would cost $60,000 and have a 5-year useful...
-
If $44,612 is collected in advance on November 1 for 7-month magazine subscriptions, what amount of subscription revenue should be recognized on December 31? Round your answer to the nearest whole...
-
What are the ethical considerations inherent in organizational development efforts, particularly concerning issues of privacy, consent, and the responsible use of data in driving organizational...
-
How does the concept of organizational readiness for change intersect with individual readiness and psychological preparedness among employees, and what diagnostic tools and readiness assessments can...
-
How does the alignment of individual employee values with organizational values affect levels of organizational commitment, and what mechanisms are most effective in achieving this alignment ?
-
What role do intrinsic motivators, such as organizational values alignment and job autonomy, play in fostering enduring organizational commitment among employees ?
-
What are the primary sources of resistance to organizational change, and which strategies are most effective in mitigating this resistance within a complex organizational structure ?
-
not cause the alarm to sound. The following table shows the results of their test. Part 1: Metal Detectors The metal detector at the entrance of a courthouse is used to detect the presence of a...
-
Dr. Chan obtained a $15,000 demand loan at prime plus 1.5% on September 13 from the Bank of Montreal to purchase a new dental X-ray machine. Fixed payments of $700 will be deducted from the dentists...
-
The paper I Smoke but I Am Not a Smoker (Journal of American College Health [2010]: 117125) describes a survey of 899 college students who were asked about their smoking behavior. Of the students...
-
The article Id Like to Buy a Vowel, Drivers Say ( USA Today, August 7, 2001) speculates that young people prefer automobile names that consist of just numbers and letters and that do not form a word...
-
The paper "The Effect of Multitasking on the Grade Performance of Business Students" (Research in Higher Education Journal [2010]: 1-10) describes an experiment in which 62 undergraduate business...
-
Classify each of the following costs relative to the cost object customer for a clothing retailer: Salesperson wages Store manager salary. Depreciation on furniture and fixtures. Cost of merchandise...
-
Number the following activities from 1 to 5 in the order corresponding to the typical flow of cost in a manufacturing company: Record the transfer of raw materials into production. Record cost of...
-
Complete the following T-accounts: Materials Inventory 320 ? 18,120 250 Wages Payable 9,000 300 Work-in-Process Inventory Finished Goods Inventory 1,000 ? ? 1,500 ? ? 9,000 ? 500 1,200
Study smarter with the SolutionInn App