ECN6540 Econometric Methods PRACTICAL 2
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STATA for Windows. ECN6540 Econometric Methods
PRACTICAL 2
Continue using the data from Practical 1.
1. Is multicollinearity a problem in this model (hint: type “vif”, look at the R squared and t statistics).
2. Create a binary, i.e. dummy variable, equal to 0 if the year is before 1996 and equal to 1 if the year is equal to 1996 or after. The command for creating a new variable is “gen” followed by the name of the new variable.
3. Include the dummy variable created in part (2) in your regression equation.
a) Provide an interpretation of the dummy variable.
b) Is it statistically significant?
4. Use the dummy variable to create a regression model which allows for differential elasticities across the two periods.
5. Test the hypothesis that there are differential intercept and differential elasticities across the two periods. (hint need to look at RSS and the STATA command “test”). Also produce the relevant test statistic by hand – does it concur with the STATA output?
2023-08-01