ASSIGNMENT 01

DUE DATE: 19 May 2021

UNIQUE NUMBER: 816933

Dear Student,

INSTRUCTIONS

Please note that the due date for your ECS4836 Assignment 01 has been moved to: 19 May
2021 (the due dates for assignments 02 and 03 remain unchanged)

Please do not use this document as a template on which to fill in your answers. Submit your
answers on a separate document and make sure to check your numbering. Also remember to
include your name and students number on the front page of your submission, and
preferably on each page of your answer sheet.

You should have received an email linking you to the Turnitin class for this module. Please
make sure to check your myLife e-mail account and activate your Turnitin profile. Remember
to include a screenshot of your Turnitin front page as part of your assignment. Both the
match overview and individual matches should be clearly visible. It can take up to 24 hours for
these reports to be generated, so make sure to plan accordingly. The general rules used are
for maximum overall and individual matches of 30% and 5% respectively.

NB Assignments submitted without a Turnitin report will receive a 50% penalty.

All the assignments for ECS4863 are strictly individual assignments! This means you are NOT
allowed to work in groups or make use of any human assistance. Indications of plagiarism
and/or cheating will be dealt with according to the University’s Disciplinary Processes.

All the best with the assignment!

This assignment deals with the following assessment criteria:

- Review of econometrics and statistics

- Time series concepts
- Demonstrate tests for unit roots

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Open Rubric
QUESTIONS

Question 1: (20 marks)

1.1 Define econometrics and explain how you view its role in relation to economics in
general. (4)

1.2 Choose your own (economics related) example with which to explain the various
steps in carrying out empirical economic analysis. (4)

1.3 Consider the follow statement: ‘the researcher should always keep in mind that
the results of research are only as good as the quality of the data’. Write a short
paragraph in which you provide reasons as to why you agree/disagree with the
statement. (3)

1.4 Explain the meaning of the following terms (2)

i. Omitted variable bias

ii. First order conditions

1.5 Explain the properties of OLS estimators (“BLUE” properties) (3)

1.6 Choose your own (economics related) example with which to explain the
difference between a one-sided and two-sided t-test. You are welcome to make
use of tables or graphs. Also make sure to clearly state your hypothesis. (4)

Question 2: (14 marks)

2.1 Distinguish between static models and distributed lag models (4)

2.2 Define cross sectional and time series data and mention which econometric
problem is more likely to be found in each of these. (3)

2.3 What is stationarity and why is it so important in time series analysis? (4)

2.4 A researcher wants to set up a regression equation where Y is a function X.

Evaluate the researcher’s options given the following scenarios: (3)

i.Y is I(1); X is I(2)

ii. Y is I(1); X is I(1); and the error term is I(0).

Question 3: (10 marks)

3.1 Conduct unit root tests for two hypothetical variables: VAR1 and VAR2. Complete
the following table: (6)

Remember to generate the logs of all the applicable variables, prior to conducting the
tests. Also remember to name the logged variables you created appropriately (for the
sake of your own referencing).

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The data is available on myUnisa/additional resources/assignment data: ECS4863
2021 Assignment 01 data. Please note that all the data is in the same Excel file, but in
different sheets

Series Model ADF Lags ADF

   
VAR1 Trend and
intercept
Intercept
None
D(VAR1) Trend and
intercept
Intercept
None
VAR2
etc.

* Statistically significant at the 10% level

** Statistically significant at the 5% level
*** Statistically significant at the 1% level

3.2 Discuss the relationship between the concepts of unit roots and the order of integration
of variables (2)

3.3 Based on your findings in 3.1, comment on the order of integration of the variables.
(2)

Question 4: (6 marks)

In this question you need to gather and analyze time series data. All data should be
downloaded from the South Africa Reserve Bank website
(https://www.resbank.co.za/en/home/what-we-do/statistics/releases/online-statistical-query)

Select any variable which starts with the same letter of the alphabet as your surname.
It has to have at least 50 observations.
You may use any interval, e.g. annual, quarterly, monthly, etc.
It can be nominal or real data.

Make sure to provide (at least) the following:

- Your surname
- The name of the time series chosen (name plus ‘KBP’ code)
- A brief description of the data
- A graph of the data
- A graph of the log of the data (only where applicable!)
- A test of the data for stationarity
- Any other noteworthy statistical properties, e.g. seasonal trends, missing values, etc.

[Total = 50 marks]

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