SOLUTION
Consider the following model 1. Consider the following AR(1) model: a. Explain why this dynamic model violates TS'3 ZCM assumption made for the unbiasedness of the FDL model estimators. b. Show th...
Consider the following AR(1) model: 1. a. Explain why this dynamic model violates TS'3 ZCM assumption made for the unbiasedness of the FDL model estimators. the following random 2. Consider walk model: yeBo yt-1 +ut, t-0,1,..,T a. Show that yt-3βο + yt-3 + ut + ut-1 + ut-2. b. Suppose that 0-0, show that y.-t βο +4 + ut-1 + + u! c. Suppose that that yo -0, and ut for all t are ii.d. with mean 0 and variance...
1. (20 points) Consider the linear regression model y = a + Bt + ut, ut id(0,%), (t = 1, ...,T). An estimator of B is b=1-1 YT- 41 (a) is estimator b consistent? (Hint: use Chebyshev's inequality) (b) If u i.i.d. N(0,1), what is the asymptotic distribution of b?
1. Consider the simple linear regression model: Ү, — Во + B а; + Ei, where 1, . . , En are i.i.d. N(0,02), for i1,2,... ,n. Let b1 = s^y/8r and bo = Y - b1 t be the least squared estimators of B1 and Bo, respectively. We showed in class, that N(B; 02/) Y~N(BoB1 T;o2/n) and bi ~ are uncorrelated, i.e. o{Y;b} We also showed in class that bi and Y 0. = (a) Show that bo is...
1. A simple dynamic programming model of capital accumulation Consider the following economy. Individuals have preferences U Blog (ct) and a constraint of the form (a) Write the Bellman equation for this economy. (b) Find the FOC(s) that must be satisfied for an optimal consumption and capital plan. (c) Show the following consumption policy is consistent with the condition(s) that you produced in (b). objective. Show that it takes the form and determine the values of γ and θ. (d)...
Question 2 (10 points) You are given the following model y-put ei. Consider two alternative estimators of β, b2xvix? and b = Zy/X 1. Which estimator would you choose and why if the model satisfies all the assumptions of classical regression? Prove your results. (4 points) 2. Now suppose that var(y)-hxi, where h is a positive constant (a) Obtain the correct variance of the OLS estimator. (2 points) (b) Show that the BLU estimator is now 6. Derive its variance....
1. Consider the following linear regression model: (a) Which assumptions are needed to make the B, unbiased estimators for the B, (b) Explain how one can test the hypothesis that A +As = 0 by means of a t-test. (c) Explain how one can test the hypothesis that A-A-0. Indicate the relevant test statistic. (d) Suppose that ri is an irrelevant explanatory variable in the population model and that you estimate the model including both and r2. What are the...