ECN6540 Econometric Methods PRACTICAL 1
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STATA for Windows. ECN6540 Econometric Methods
PRACTICAL 1
1. Save the file with the *.dta extension called “ practicals 1 and 2_data” to your own drive.
2. The data contains information on the natural logarithm of real investment (linvest), the natural logarithm of real GNP (lgnp), the natural logarithm of the interest rate (lintr), and the natural logarithm of the inflation rate (linflate). The data is time series over the period 1990 to 2004.
Use the “sum” command to gain summary statistics of the variables. Then use the “ pwcorr” command to provide a correlation matrix of the variables. Are any of the variables highly correlated and what might this imply in terms of modelling?
3. Estimate a model where investment (i.e. dependent variable) is a function of GNP, the interest rate and inflation rate. Hence the model is of the form:
lny t= β0 + β1lnx1t + β2lnx2t + β3lnx3t + ε t
The command in STATA for undertaking OLS regression is “ regress” note the first variable typed after the command is the dependent variable followed by the independent (RHS) variables (order of the independent variables does not matter).
4. Interpret the parameter estimates.
5. Are the coefficients individually significant? Produce the relevant test statistic by hand – does it concur with the STATA output?
6. Are the coefficients jointly significant? Produce the relevant test statistic by hand – does it concur with the STATA output?
2023-08-01