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    Alanazi Abdulsalam
    The document contains instructions for analyzing economic data using statistical software. It provides an empirical model and asks the reader to: 1. Estimate the model and test several null and alternative hypotheses. 2. Carry out diagnostic tests to check assumptions of linearity, homoscedasticity, and normality. 3. Address any outliers by including dummy variables and re-running tests.

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    Alanazi Abdulsalam
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    The document contains instructions for analyzing economic data using statistical software. It provides an empirical model and asks the reader to: 1. Estimate the model and test several null and alternative hypotheses. 2. Carry out diagnostic tests to check assumptions of linearity, homoscedasticity, and normality. 3. Address any outliers by including dummy variables and re-running tests.

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    The document contains instructions for analyzing economic data using statistical software. It provides an empirical model and asks the reader to: 1. Estimate the model and test several null and alternative hypotheses. 2. Carry out diagnostic tests to check assumptions of linearity, homoscedasticity, and normality. 3. Address any outliers by including dummy variables and re-running tests.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    42 views3 pages

    Outputs 1

    Uploaded by

    Alanazi Abdulsalam
    The document contains instructions for analyzing economic data using statistical software. It provides an empirical model and asks the reader to: 1. Estimate the model and test several null and alternative hypotheses. 2. Carry out diagnostic tests to check assumptions of linearity, homoscedasticity, and normality. 3. Address any outliers by including dummy variables and re-running tests.

    Copyright:

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    of 3

    ‫بسم هللا الرحمن الرحيم‬

    2. Read the compiled data into Stata, and estimate the empirical model. Test the following null and
    alternative hypotheses:

    Source | SS df MS Number of obs = 48


    -------------+------------------------------ F( 6, 41) = 1.81
    Model | .856515258 6 .142752543 Prob > F = 0.1209
    Residual | 3.23285478 41 .078850117 R-squared = 0.2094
    -------------+------------------------------ Adj R-squared = 0.0938
    Total | 4.08937004 47 .087007873 Root MSE = .2808

    ------------------------------------------------------------------------------
    dlypc | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    lypc90 | -.2062384 .0770836 -2.68 0.011 -.3619119 -.0505649
    lseced | .2577504 .0986859 2.61 0.013 .0584502 .4570505
    govgdp | .0105313 .0064143 1.64 0.108 -.0024227 .0234854
    open | .0004107 .0016631 0.25 0.806 -.0029479 .0037694
    infl | .1230312 .1081789 1.14 0.262 -.0954406 .341503
    credit | .2556387 .151297 1.69 0.099 -.0499118 .5611892
    _cons | .7505424 .4124443 1.82 0.076 -.0824058 1.583491
    ------------------------------------------------------------------------------

    (i) H0:2=3=4=5=6=7=0 against H1:j0 for at least one j(2...7), using a significance
    level of 0.05.
    (ii) H0:2=0 against H0:20 using a significance level of 0.05.
    (iii) H0:2=0 against H0:20 using a significance level of 0.01.
    (iv) H0:3=0 against H0:3>0 using a significance level of 0.05.
    (v) H0:7=0 against H0:7>0 using a significance level of 0.05.

    For the above questions, you should answer them manually as in the exam, for students who don’t know
    how to answer or comment on them, you could see Dr Jan (Iraqi) for further explanation.
    4. Carry out diagnostic tests for the validity of the following statistical assumptions underlying the
    model you have estimated and the hypotheses you have tested in Q2:

    (i) The linearity assumption.


    Source | SS df MS Number of obs = 48
    -------------+------------------------------ F( 7, 40) = 0.12
    Model | .06668275 7 .009526107 Prob > F = 0.9965
    Residual | 3.16617189 40 .079154297 R-squared = 0.0206
    -------------+------------------------------ Adj R-squared = -0.1508
    Total | 3.23285464 47 .068784141 Root MSE = .28134

    ------------------------------------------------------------------------------
    e1 | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    lypc90 | .2026519 .233909 0.87 0.391 -.2700958 .6753996
    lseced | -.2427308 .2823368 -0.86 0.395 -.8133549 .3278932
    govgdp | -.010667 .0132804 -0.80 0.427 -.0375076 .0161736
    open | -.0003331 .0017053 -0.20 0.846 -.0037797 .0031135
    infl | -.0955301 .1502686 -0.64 0.529 -.3992342 .208174
    credit | -.2796303 .3402889 -0.82 0.416 -.9673798 .4081191
    yhat2 | 1.663375 1.812261 0.92 0.364 -1.999341 5.326092
    _cons | -.6515433 .8213831 -0.79 0.432 -2.311621 1.008534
    ------------------------------------------------------------------------------
    (ii) The homoscedasticity assumption.
    Source | SS df MS Number of obs = 48
    -------------+------------------------------ F( 1, 46) = 0.24
    Model | .00606996 1 .00606996 Prob > F = 0.6273
    Residual | 1.16893934 46 .025411725 R-squared = 0.0052
    -------------+------------------------------ Adj R-squared = -0.0165
    Total | 1.1750093 47 .025000198 Root MSE = .15941

    ------------------------------------------------------------------------------
    e2 | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    yhat2 | .1369941 .2803018 0.49 0.627 -.4272243 .7012124
    _cons | .0536875 .0362078 1.48 0.145 -.0191949 .12657
    ------------------------------------------------------------------------------

    (iii) The normality assumption.


    31.599871

    It has been suggested that a possible remedy for a non-normality problem is to


    create a 0-1 dummy variable for any ‘outlier’ observation with a residual
    larger than three times the standard error of the regression. Investigate
    whether there are any such outlier observations in the data you have used to
    estimate your model. If there are any outlier observations, create a 0-1 dummy
    variable for each outlier you find, and re-estimate the model. Using the new
    specification, repeat the diagnostic tests you carried out in Q4, and comment
    briefly on the results.
    Source | SS df MS Number of obs = 48
    -------------+------------------------------ F( 7, 40) = 5.11
    Model | 1.93114953 7 .275878505 Prob > F = 0.0003
    Residual | 2.15822051 40 .053955513 R-squared = 0.4722
    -------------+------------------------------ Adj R-squared = 0.3799
    Total | 4.08937004 47 .087007873 Root MSE = .23228

    ------------------------------------------------------------------------------
    dlypc | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    lypc90 | -.1965536 .0638014 -3.08 0.004 -.325501 -.0676062
    lseced | .2667369 .081659 3.27 0.002 .101698 .4317758
    govgdp | .0087029 .0053218 1.64 0.110 -.0020529 .0194587
    open | .0005442 .001376 0.40 0.695 -.0022368 .0033253
    infl | .0991334 .089647 1.11 0.275 -.0820499 .2803166
    credit | .1970322 .1258417 1.57 0.125 -.0573034 .4513679
    DMY | -1.059586 .2374235 -4.46 0.000 -1.539436 -.5797349
    _cons | .7062628 .3413231 2.07 0.045 .0164231 1.396102
    ------------------------------------------------------------------------------
    (i) The linearity assumption.

    Source | SS df MS Number of obs = 48


    -------------+------------------------------ F( 7, 40) = 0.01
    Model | .002012988 7 .00028757 Prob > F = 1.0000
    Residual | 2.15620753 40 .053905188 R-squared = 0.0009
    -------------+------------------------------ Adj R-squared = -0.1739
    Total | 2.15822052 47 .045919586 Root MSE = .23217

    ------------------------------------------------------------------------------
    e3 | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    lypc90 | .009753 .0812979 0.12 0.905 -.1545562 .1740623
    lseced | -.0137149 .1081433 -0.13 0.900 -.2322808 .2048509
    govgdp | -.0003871 .0056692 -0.07 0.946 -.011845 .0110708
    open | -.0000339 .0013862 -0.02 0.981 -.0028356 .0027678
    infl | -.0032091 .0909737 -0.04 0.972 -.1870737 .1806556
    credit | -.0083806 .1324005 -0.06 0.950 -.2759719 .2592107
    yhat4 | .0819433 .4240411 0.19 0.848 -.7750758 .9389624
    _cons | -.029089 .372765 -0.08 0.938 -.7824753 .7242973
    ------------------------------------------------------------------------------

    (ii) The homoscedasticity assumption.


    Source | SS df MS Number of obs = 48
    -------------+------------------------------ F( 1, 46) = 1.36
    Model | .006902278 1 .006902278 Prob > F = 0.2492
    Residual | .233084057 46 .005067045 R-squared = 0.0288
    -------------+------------------------------ Adj R-squared = 0.0076
    Total | .239986335 47 .005106092 Root MSE = .07118

    ------------------------------------------------------------------------------
    e4 | Coef. Std. Err. t P>|t| [95% Conf. Interval]
    -------------+----------------------------------------------------------------
    yhat4 | .1103248 .0945267 1.17 0.249 -.0799475 .3005971
    _cons | .0314893 .0154542 2.04 0.047 .0003815 .062597
    ------------------------------------------------------------------------------

    (iii) The normality assumption.


    .73589214

    Done by: Mosaab Aljuaid

    ‫وال تنسونا من صالح الدعاء‬

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