Question

2. You are the chief analyst to monitor an eastern city's expenditures. Using the city's quarterly in billion dollars from 2007-01 to 2014-03, you are trying to model: y.-As + βι t + ut, where u, ~ N(0, σ2). (a) Supposing 1 for the (i.e., 2 Q3? ty) measured government consumption data starting quarter (i.е., 2007-Q1), then what is , for 2014- (5 marks) (b) Suppose your OLS (ordinary least squares) estimates for the trend model are A 1.62 and A-3.55, and the sum of squared residuals (SSR)-- 725. Based on your estimated trend model, construct a prediction for the city's govermment consumption expenditures in 2014-Q4. (5 marks) (c) It is calculated that Σ(4-4.)-928. Use the Durbin-Watson (DW determine i there is (first-order) serial-correlation in the population errors (u, at the 1 % significance level. (Requirements: calculate Dw value, and draw conclusions) statistic and critical (10 marks)

Answer 1

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