Econometrics Exam number: 475662 8.

January 2021
Econometrics Exam number: 475662 8. January 2021

Question 1:
Use the data set “data_exam2020_21” (see description at the end of the assignment) and
estimate an OLS model where gdp is explained as a function of labour, edu, energy and time.
Explain and discuss the results, including assessment of practical and statistical significance.
Discuss which of the 7 assumptions may be violated. Do a RESET test for omitted nonlinearity.

As we can see the model for labour and energy has a significant value of 0, and edu and intercept
has a significant value of 0,01. We can see that time has a negative effect on the model. Overall
the model is significant though.
Econometrics Exam number: 475662 8. January 2021

Based on the reset test, we can then conclude that the 7th assumption is violated.
Econometrics Exam number: 475662 8. January 2021

Question 2:
Assess as to whether non-normality is a problem in the regression in Question 1. Estimate a
median regression for the model in Question 1 and compare to the OLS. Also, estimate different
quantile regressions and compare these to each other and the median regression.

The code:
Econometrics Exam number: 475662 8. January 2021

The model:

We can see, that the p-

value level for energy
remains under 0.001 in
all three quantiles. Just
like it happens with its
significant code in
question 1. In the two
first quantiles for labour
is remain the same as
energy, but in the third
quantile we can see, it
no longer has a p-value
level under 0.001.
Therefore, the quantile
regressions show a
positive relationship
between energy and
labour in the Q25 and
Q50.
Also, we can see, that
time has a negative
effect on the gross
domestic product in
Q25.
Econometrics Exam number: 475662 8. January 2021

Question 3:
Following each step in the Box-Jenkins methodology, for the variable dgdpt, choose between
AR(1) with a constant and MA(1) model with a constant. For the preferred model, test for the
presence of ARCH errors with a McLeod and Li test. Present all estimates and test-statistics that
you used for decision and interpret the results.

Firstly, we have to check if the data is stationary.

Because the p-value < 0.05, then we can reject the null hyp. That means we have stationarity in
the data, which is a good thing.

Secondly, we make a Box-Ljung test to determine the goodness of fit by ACF, PACF and Q-statistic:

AFC-test:
Econometrics Exam number: 475662 8. January 2021

PAFC-test:

Q-Statistic:

Because the p-value < 0.005, we then reject it.

To fit the MA(1), we will have to create a spec, and then a ARIMA model.

The coding:
Econometrics Exam number: 475662 8. January 2021

The model:
Econometrics Exam number: 475662 8. January 2021

Now we test the residuals, to draw them out and see if we have any stationary.
The code:

The models:

AFC-Model:
Econometrics Exam number: 475662 8. January 2021

AFC^2-Model:

We can see, that we have a decreasing trend, both at the AFD-model and the AFC^2-model, which
means the residuals are serial correlated, which means we don’t have any stationarity.
Now we do the same for with the Partial ACF.

PAFC-Model:
Econometrics Exam number: 475662 8. January 2021

PAFC^2-Model:
Econometrics Exam number: 475662 8. January 2021

Question 4:
Conduct an augmented Dickey-Fuller test for a unit root for the variables gdpt and labourt.
Regress gdpt on labourt plus a constant and, based on the Engle-Granger cointegration test,
discuss whether their relationship might be spurious (see table with critical values at end of the
assignment). Present all estimates and test-statistics that you used for decision and interpret the
results.

We start by looking if the spread I persistent. If it’s, then the spread is non-stationary

We can see, that we have 10 lags. So what we do is, we will start from one end to the other to see
at what point the lags are significant:
Econometrics Exam number: 475662 8. January 2021

We can see in the model beneath under pr(<ltl), at lag 10 and lag 9 is significant.