Question: 2. Constructing the fitted values (X_hat) [15 marks, each sub-question carries equal marks] Next, we'll construct the fitted values of the protection from expropriation measure

2. Constructing the fitted values (X_hat) [15 marks, each sub-question carries

equal marks] Next, we'll construct the fitted values of the protection from

2. Constructing the fitted values (X_hat) [15 marks, each sub-question carries equal marks] Next, we'll construct the fitted values of the protection from expropriation measure using the first-stage regression results. We'll calculate and place the fitted values on the 'Data' worksheet. (2a) Label the column G on the 'Data' worksheet as "fit_proc_expl" (in cell G1). In cell G2 to G64, calculate the fitted values. and place the fitted values of protection from expropriation risk. State clearly the formula used to calculate (2b) What's the correlation of fit_proc_expl and proc_exp [HINT: Use Excel's CORREL function]? Does this conform to your expectation based on your findings in question 1? CONTINUE TO QUESTION 3

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