Question: Newey-West coefficient standard errors: (a) Explain why (repeating Equation 16.17 from page 489) Xn t1 bvt [ XVtb 0 where b is the OLS

Newey-West coefficient standard errors:

(a) Explain why (repeating Equation 16.17 from page 489)

Xn t¼1 bvt [ XVtðbÞ ¼ 0 where b is the OLS coefficient vector and VtðbÞ ¼ xtðYt & x0 t

bÞ. (Hint: Show that these are simply the OLS estimating equations.)

(b) Apply Newey and West’s procedure to compute HAC standard errors for the OLS coefficients in Fox and Hartnagel’s time-series regression. Do the results differ from those employing the usual OLS standard errors? Do the results differ from those obtained by GLS?

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