Questions 4 (Each 4 points) The study of the link between inflation and the supply of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Questions 4 (Each 4 points) The study of the link between inflation and the supply of money has a long history. According to one theory, inflation is closely tied to the rate of money growth as well as the rate at which output grows. Consider the following equation that models this relationship: = INFẞ1+ B2GM + ẞ3GX + e Here, INF= rate of inflation (%), GM= rate of growth of the money supply (%), and GX= rate of growth real GDP (%). The file money.dta contains data on these variables for a sample of 76 countries and is taken from a study by Harold J. Brumm (2005), Money Growth, Output Growth, and Inflation: A Reexamination of the Modern Quantity Theory's Linchpin Prediction. 1. Plot INF against GM and GX separately. 2. According to the quantity theory, B₂ = 1, and ẞ3 = -1. Conduct F test to assess whether the evidence supports these restrictions by Stata. Comment on it (1 sentence) 3. How would you test the restriction ẞ2 + ẞ3 = 0 by rewriting the model. Estimate the new model and present your main results. Then test whether this restriction is supported at the 5% level of significance. Comment on it (1 sentence) Questions 4 (Each 4 points) The study of the link between inflation and the supply of money has a long history. According to one theory, inflation is closely tied to the rate of money growth as well as the rate at which output grows. Consider the following equation that models this relationship: = INFẞ1+ B2GM + ẞ3GX + e Here, INF= rate of inflation (%), GM= rate of growth of the money supply (%), and GX= rate of growth real GDP (%). The file money.dta contains data on these variables for a sample of 76 countries and is taken from a study by Harold J. Brumm (2005), Money Growth, Output Growth, and Inflation: A Reexamination of the Modern Quantity Theory's Linchpin Prediction. 1. Plot INF against GM and GX separately. 2. According to the quantity theory, B₂ = 1, and ẞ3 = -1. Conduct F test to assess whether the evidence supports these restrictions by Stata. Comment on it (1 sentence) 3. How would you test the restriction ẞ2 + ẞ3 = 0 by rewriting the model. Estimate the new model and present your main results. Then test whether this restriction is supported at the 5% level of significance. Comment on it (1 sentence)
Expert Answer:
Answer rating: 100% (QA)
Answer Here are the responses to each question 1 Plot INF against GM and GX separately stata use mon... View the full answer
Related Book For
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
Posted Date:
Students also viewed these finance questions
-
The Canadian Bankers Association is pleased to provide this submission in response to Finance Canada's January 2019 consultation paper (the Consultation Paper) on the merits of open banking in...
-
The Pierce Company manufactures drill bits. The production of the drill bits occurs in lots of 1000 units. Due to the intense competition in the industry and the correspondingly low prices, Pierce...
-
In the previous problem, assume the equity increases by 1,500 solaris due to retained earnings. If the exchange rate at the end of the year is 1.24 solaris per dollar, what does the balance sheet...
-
The balance of the purchases ledger control account in the general ledger of A. Brook and Co. at 1 September is 1,984.50, the details being as follows: J. Smith & Co....................... 378.71 A....
-
The lightweight glass sphere in FIGURE Q29.1 hangs by a thread. The north pole of a bar magnet is brought near the sphere. a. Suppose the sphere is electrically neutral. Is it attracted to, repelled...
-
State which one of the following is correct: (a) \(d G=-S d T+V d P\) (b) \(d U=T d S+P d V\) (c) \(d H=T d S-V d P\) (d) \(d A=-S d T+P d V\).
-
Complete the following MRP matrix for itemA: Period 4 578 Item: A Lot Size: Mult 50LT:2 Gross Requirements Scheduled Receipts Projected on Hand 50 Net Requirements Planned Order Receipts Planned...
-
Laizure Clinic uses patient - visits as its measure of activity. The clinic bases its budgets on the following information: Revenue should be $ 5 8 . 9 0 per patient - visit. Personnel expenses...
-
The file P02_07.xlsx includes data on 204 employees at the (fictional) company Beta Technologies. For this problem, consider this data set as the population frame. a. Using the method in this section...
-
Could laws pertaining to insider trading and the general protection of investors be simplified. Explain.
-
Why is financial statement analysis typically accompanied by an operational analysis?
-
What is the role of financial analysis in capital investment decisions in for-profit firms?
-
Describe qualitative risk assessment. Why does it work?
-
What is budgeting?
-
What are three metrics commonly used to track operations? Describe them.
-
A 6-cm-diameter shaft rotates at 3000 rpm in a 20-cm- long bearing with a uniform clearance of 0.2 mm. At steady operating conditions, both the bearing and the shaft in the vicinity of the oil gap...
-
Use translations to graph f. f(x) = x-/2 +1
-
The Consortium for Advanced Manufacturing International (CAM-I) and the American Productivity and Quality Center (APQC) collaborated in the survey of 166 manufacturing and service firms to assess the...
-
FIFO Method Refer to the information in Problem 6-39. In Problem 6-39, South Atlantic Pulp Company processes wood pulp for manufacturing various paper products. The company employs a process costing...
-
Assume the same information as in problem 5-56 above, except that, to improve the accuracy of the ABC-costs, EEI has determined resource consumption rates based on cost drivers instead of...
-
Suppose that the random variables \(X\) and \(Y\) are independent and you know their distributions. Explain why knowing the value of \(X\) tells you nothing about the value of \(Y\).
-
Suppose that \(X\) denotes the amount of rainfall in your hometown during a randomly selected month and \(Y\) denotes the number of children born in Los Angeles during the same month. Are \(X\) and...
-
Suppose that \(Y_{1}, \ldots, Y_{n}\) are i.i.d. random variables with a \(N(1,4)\) distribution. Sketch the probability density of \(\bar{Y}\) when \(n=2\). Repeat this for \(n=10\) and \(n=100\)....
Study smarter with the SolutionInn App