The McGraw-Hill Series Economics essentials of economics brue, McConnell, and Flynn Essentials of Economics

Empirical Exercises
9.17. Using the data given in Table 9.8, test the hypothesis that the error variances in the
two subperiods 1958–IV to 1966–III and 1966–IV to 1971–II are the same.
9.18. Using the methodology discussed in Chapter 8, compare the unrestricted and restricted
regressions (9.7.3) and (9.7.4); that is, test for the validity of the imposed restrictions.
9.19. In the U.S. savings–income regression (9.5.4) discussed in the chapter, suppose that
instead of using 1 and 0 values for the dummy variable you use
Z
i
=
a
+
b D
i
, where
D
i
=
1 and 0,
a
=
2, and
b
=
3. Compare your results.
9.20. Continuing with the savings–income regression (9.5.4), suppose you were to assign
D
i
=
0 to observations in the second period and
D
i
=
1 to observations in the first
period. How would the results shown in Eq. (9.5.4) change?
9.21. Use the data given in Table 9.2 and consider the following model:
ln Savings
i
= 
β
1
+
β
2
ln Income
i
+
β
3
ln
D
i
+
u
i
where ln stands for natural log and where 
D
i
= 
1 for 1970–1981 and 10 for
1982–1995.
a.
What is the rationale behind assigning dummy values as suggested?
b.
Estimate the preceding model and interpret your results.
c.
What are the intercept values of the savings function in the two subperiods and
how do you interpret them?
9.22. Refer to the quarterly appliance sales data given in Table 9.3. Consider the following
model:
Sales
i
=
α
1
+
α
2
D
2
i
+
α
3
D
3
i
+
α
4
D
4
i
+
u
i
where the
D’
s are dummies taking 1 and 0 values for quarters II through IV.
a.
Estimate the preceding model for dishwashers, disposers, and washing machines
individually.
b.
How would you interpret the estimated slope coefficients?
c.
How would you use the estimated 
α
’s to deseasonalize the sales data for individ-
ual appliances?
*
Chandan Mukherjee, Howard White, and Marc Wuyts, 
Econometrics and Data Analysis for Developing
Countries,
Routledge, London, 1998, pp. 372–375. Notations adapted.
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