Question: For the Natural Gas data considered in Chapter 4, problem 16. The model is logConsit = 0 + 1logPgit + 2logPoit + 3logPeit + 4logHDDit

For the Natural Gas data considered in Chapter 4, problem 16. The model is logConsit = β0 + β1logPgit + β2logPoit + β3logPeit + β4logHDDit

+β5logPIit + uit where i = 1, 2, . . . , 6 states and t = 1, 2, . . . , 23 years.

(a) Run Seemingly Unrelated Regressions (SUR) for the first two states. Compare with OLS.

(b) Run SUR for all six states. Comment on the results and compare with those of part (a). (Are there gains in efficiency?)

(c) Test for Diagonality of Σ across the six states using the Breusch and Pagan (1980) LM test and the Likelihood Ratio test.

(d) Test for the equality of all coefficients across the six states.

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