a. Binary variables are introduced in the model to account for qualitative variables being used within...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
a. Binary variables are introduced in the model to account for qualitative variables being used within the research. However, there are a few issues that will arise without proper usage of these binary variables. List at least two consequences of improper usage of binary variables and how they can be corrected. (4 marks) b. Use the model below to answer the following questions: Where: = Inflation Rate inc = Income nx = Net Exports De 1 if the country is an emerging economy The standard errors are in (). i. ii. iii. log(n) = 8.58 +1.93 log(inc) + 0.09nx + 0.04x - 2.01De (1.912) (0.145) (1.079) (1.677) R = 0.47 n = 70 Durbin- Watson statistic = 2.01 iv. V. Interpret the constant and the coefficient of the dummy variable. (4 marks) What is the optimal value of net exports? (2 mark) Test the hypothesis, at the 5% level of significance, that a 1% increase in income causes the inflation rate to increase by 3%. Be sure to show all steps. (6 marks) Is B3 unbiased? Show/provide all necessary working and assumptions. (2 marks) Are you able to determine if the residuals are autocorrelated? Explain. (2 marks) a. Binary variables are introduced in the model to account for qualitative variables being used within the research. However, there are a few issues that will arise without proper usage of these binary variables. List at least two consequences of improper usage of binary variables and how they can be corrected. (4 marks) b. Use the model below to answer the following questions: Where: = Inflation Rate inc = Income nx = Net Exports De 1 if the country is an emerging economy The standard errors are in (). i. ii. iii. log(n) = 8.58 +1.93 log(inc) + 0.09nx + 0.04x - 2.01De (1.912) (0.145) (1.079) (1.677) R = 0.47 n = 70 Durbin- Watson statistic = 2.01 iv. V. Interpret the constant and the coefficient of the dummy variable. (4 marks) What is the optimal value of net exports? (2 mark) Test the hypothesis, at the 5% level of significance, that a 1% increase in income causes the inflation rate to increase by 3%. Be sure to show all steps. (6 marks) Is B3 unbiased? Show/provide all necessary working and assumptions. (2 marks) Are you able to determine if the residuals are autocorrelated? Explain. (2 marks)
Expert Answer:
Answer rating: 100% (QA)
a Consequences of improper usage of binary variables and how they can be corrected 1 Endogeneity Bias Improper usage of binary variables can lead to e... View the full answer
Related Book For
Understanding Business Ethics
ISBN: 9781506303239
3rd Edition
Authors: Peter A. Stanwick, Sarah D. Stanwick
Posted Date:
Students also viewed these economics questions
-
write a abstract on this paper ? Introduction Governments require money to run their operations and pay civil servants who ensure that services to the population are delivered. The money that states...
-
Mary Wells Lawrence once said, In this business, you can never wash the dinner dishes and say they are done. You have to keep doing them constantly. If you were a business executive or information...
-
A torque of 0.97 N m is applied to a bicycle wheel of radius 35 cm and mass 0.75 kg. Treating the wheel as a hoop, find its angular acceleration.
-
The following frequency distribution represents the closing prices (in dollars) of homes sold in a Midwest city. (a) Construct a cumulative frequency distribution. (b) Construct a cumulative relative...
-
Find the diameter required for reinforced concrete pipe laid at a slope of 0.001 and required to carry a uniform flow of \(19.3 \mathrm{ft}^{3} / \mathrm{sec}\) when the depth is \(75 \%\) of the...
-
On January 1, 2017, Kimbel Inc. had these stockholders' equity balances Common Stock, $1 par (2,000,000 shares authorized, 600,000 shares issued and outstanding) .............................$...
-
Determine whether the planes are parallel, perpendicular, or neither. x + 7y-z = 7, 7x-7y + z = 1 parallel O perpendicular O neither If neither, find the angle between them. (Use degrees and round to...
-
Scenario: In a population, 10% of people are left-handed, so that means 90% of people are right-handed. In a sample of 50 people, find the probability that more than 12 of them are left-handed. What...
-
Why do we use the overall cost of capital for investment decisions even when only one source of capital will be used (e.g., debt)? In computing the cost of capital, do we use the historical costs of...
-
Emilys Situation on the Date of Her Death Type of Asset Fair Market Value Owner(s) Checking account $20,000 Emily Money market funds $540,000 Emily Common stock $1,200,000 Emily and Eva, as joint...
-
would your answer change for the previous question if it was not a perpetuity, but an annuity, with 15 more years to go and the initial payment amount $2,000,000? the initial payment will be repaid...
-
Diana is reviewing her portfolio of investments, which includes certain bonds and stocks. She has a large amount of her funds tied up in Government of Canada Treasury bills paying 5%. She is...
-
As the lottery winner, you are promised 15 payments of $0.99 million each year starting a year from now. If the discount rate is 0.117, what is the present value of your lottery winnings? step by...
-
Notes on similarities, differences, and patterns you see across all companies, your ideas on potential explanations for these, and your recommendation on the best company to invest in. Calculate the...
-
Choose two matrices A and B with dimension 2 x 2. Calculate det A, det B, and det (AB). Repeat this process until you are able to discover how these three determinants are related. Summarize your...
-
Diversity is an important issue in all organizations. What is the importance of addressing diversity, and how can diversity be achieved?
-
Swiss banks have had a long tradition of keeping information about their clients confidential. Is this still the correct strategic focus to take in the 21st century? Should the United States...
-
Do you perceive yourself as a transformational or transactional leader? Explain your answer.
-
Provide a definition of an employee fringe benefit.
-
Provide three examples of items of income that are considered compensation.
-
Frank and Dale Cumack are married and filing a joint income tax return. During the current year, Frank, age 63, was retired from government service and Dale, 55, was employed as a university...
Study smarter with the SolutionInn App