Bahir Dar University Department of Economics
Econometrics II Assignment I
Maximum weight : 10%
Instruction
Give short and precise answer for the following questions.
Question 1: What is a dummy variable ? Design a hypothetical econometric model with only dummy inde-
pendent variables?
Question 2: The log of the odds ratio, is not only linear in explanatory variables, but also (from the estimation
viewpoint) linear in the parameters. Clearly show this?
Question 3: What is the meaning of dummy variable trap?
Question 4: Suppose we have the following model
Yb = 100 + 15 D2i − 20 D3i
t (25.853) (2.645) (−5.698)
Where
• Y is household income, D2i is a dummy variable representing literate household head, D3i is also a
dummy variable representing female headed household. Interpret each coefficient?
Question 5: The following table summarize the information on 100 covid-19 test result on male and female
and their status of infection.
Status Male Female
Infected (I) 70 30
Not infected (NI) 30 70
Total 100 100
Compute
1. The probability of being infected with covid-19 if the individual is male: Prob(I|Male) ?
2. The probability of not infected with covid-19 if the individual is male: Prob(NI|Male)?
3. The probability of being infected with covid-19 if the individual is female: Prob(I|Female)?
4. The probability of not infected with covid-19 if the individual is female: Prob(NI|Female) ?
5. The odds of Male to Female and intrepret the result?
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Bahir Dar University Department of Economics
Econometrics II Assignment II
Maximum weight : 10%
Instruction
Give short and precise answer for the following questions.
Question 1: Given the following simultaneous equations where Y1 , Y2 , Y3 and Y4 are as follow:
Y1 = α0 + α1 Y2t + α2 Y3 + α3 X1 + U1
Y2 = β0 + β1 Y3 + β2 X1 + β3 X2 + U2
Y3 = C0 + D1 Y1 + C2 X1 + C3 X2 + U3
Y4 = D0 + D1 Y1 + D2 Y2 + D3 X3 + U4
1. Check that whether the above equations are identified or not using order conditions?
2. Check that whether the above equations are identified or not using rank conditions?
Question 2: What does it mean when we say a stochastic process has a unit root?
Question 3: State the null and alternative hypotheses of Dicky Fuller test ?
Question 4: Explain the difference between qualitative and quantitative data with the help of examples.
Question 5: What is the difference between stochastic and deterministic trends in time series analysis?
Question 6: Explain the procedures of Engel-Granger co-integration procedure using two variables Yt and Xt ?
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Bahir Dar University Department of Economics
Econometrics II Assignment III
Maximum weight : 10%
Instruction
Give short and precise answer for the following questions.
Question 1: Suppose we have a panel data model as follow
W ageit = βi1 + β1 Genderi + β2 Religioni + β3 Ageit + Uit where i = individual and t = year
1. What will happen to this model if we use pooled OLS?
2. Which panel data model is appropriate to estimate this equation?
Question 2: Explain the difference between under identified , exactly identified and over identified equation
in simultaneous equations ?
Question 3: Define the term simultaneous-equations bias and Identification?
Question 4: Why two stage least square method is called two stage least square?
Question 5: State some of the shortcomings of Linear probability model?
Question 6: Explain the main difference between
1. Balanced and unbalanced panel data?
2. Short and long panel?
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