ECON321 Lecture Notes - Lecture 1: Econometrics, Farad, Matrix Multiplication

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blueraven607

5 Dec 2014

School

University of Waterloo

Department

Economics

Course

ECON321

Professor

Kathleen Rybczynski

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Document Summary

Variable something that takes on different values for different observations. Parameters constants that define the direction & strength of a relationship between variables. Basic math n xi=x1 x2 xn summation operator: i=1. For any constant c: n cxi=c n xi i=1 i=1 i=1. For any constants a and b, and variables x and y: Axi byi = a n xi + b n yi n i=1 i=1 i=1 be careful! n xi yi i=1 n i=1 n xi / i=1 yi . Some statistics using basic math n xi mean of a variable: x=n 1 i=1. Variance: 1 n i=1 n n i=1 n di = . Xi x n xi i=1 n i=1 i=1. Linear functions: y = x y is a linear function of the variable x. y is also linear in the parameters. The parameters (constants) are a and b . y slope = = y.

Related Questions

You are the Economist of the office of the Community Center at UCLA. In 2015, you implemented a program of entrepreneurship in LA. Your design was such that the western region was offered that program, while the eastern region was not. The key variable that measures the performance of the program is the percentage of self-employed people.

You collected information regarding self-employment before and after the program, and the average percentage of self-employed people in each population is summarized in the Table below

inside of () is one value:

West. East.
2014. (0.21). (0.20)
2016. (0.29). (0.23)

(a) Compute the change in self-employment in the West and East, respectively.

(b) Calculate the difference of this change (obtained above) between the West and East. What will be the effect of the program on self-employment? Interpret.

To do it in econometrics, you prefer to present that information in a regression using dummies for region and time.

self_employed = B0 + B1 West + B2year2016+B3west x year2016 + error

amberox656

Princples of Econometrics 4th Edition

5.13

Download link to br2.dat file for STATA-> http://www.principlesofeconometrics.com/poe4/data/stata/br2.dta

The file br2.dat contains data on 1,080 houses sold in Baton Rouge, Louisiana,

during mid-2005.We will be concerned with the selling price (PRICE), the size of the

house in square feet (SQFT), and the age of the house in years (AGE).

(a) Use all observations to estimate the following regression model and report the

results

PRICE =b1 + b2*SQFT + b3AGE + e

(i) Interpret the coefficient estimates.

(ii) Find a 95% interval estimate for the price increase for an extra square foot

of living spaceâthat is, @PRICE=@SQFT.

(iii) Test the hypothesis that having a house a year older decreases price by

1000 or less (H0 : b3 > -1000) against the alternative that it decreases

price by more than 1000 (H1 : b3 < -1000).

(b) Add the variables SQFT2 and AGE2 to the model in part (a) and re-estimate the

equation. Report the results.

(i) Find estimates of the marginal effect (dx/dy)PRICE=(dx/dy)SQFT for the smallest

house in the sample, the largest house in the sample, and a house with 2300

SQFT. Comment on these values. Are they realistic?

(ii) Find estimates of the marginal effect @PRICE=@AGE for the oldest house

in the sample, the newest house in the sample, and a house that is 20 years

old. Comment on these values. Are they realistic?

(iii) Find a 95% interval estimate for the marginal effect (dx/dy)PRICE=(dx/dy)SQFT for a

house with 2300 square feet.

(iv) For a house that is 20 years old, test the hypothesis

the equation. Report the results. Repeat parts (i), (ii), (iii), and (iv) from

part (b) for this new model. Use SQFT =2300 and AGE = 20.

(d) From your answers to parts (a), (b), and (c), comment on the sensitivity of the

results to the model specification.

1. GDP is a key concept in Macroeconomics.

a. What is the definition of GDP?

b. List and explain the 3 different approaches to calculating GDP and explain how they are different. i. List and explain the approaches and how you would use each to calculate GDP.

c. List and explain 3 types of transactions that would not be included in GDP and why they should be omitted. i. Look in the notes and find 3 types of transactions that are excluded from the computation of GDP and write them down along with the explanation of each and why they are not included.

d. Thoroughly explain the components of GDP and relate those components to the Circular Flow model with government and international trade. i. List and explain the 4 components of GDP ii. Relate each of them to the components of the complete circular flow model that you studied in part 1 of the course.

e. Explain the difference between nominal and real GDP, and how to calculate real GDP i. Look in the notes to find this 8very straight forward.

f. Explain the difference between GDP and Per Capita GDP; explain how to calculate Per Capita GDP, and how Per Capita GDP can be used.

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ECON321 Lecture Notes - Lecture 1: Econometrics, Farad, Matrix Multiplication

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