BOSTON COLLEGE

Department of Economics

Econometrics II

Fall 1997

Prof. Baum, Mr. Robotti

PROBLEM SET ONE

due at classtime, 19 September 1997

1. Greene 9-7.

2. Greene 9-8.

3. Greene 11-1.

4. Greene 11-7.

EMPIRICAL EXERCISE: to be performed with UNIX RATS. You should place your RATS commands in a file (e.g. ps1.rat), using the editor, and then invoke RATS via the command:

$ rats ps1.rat > ps1.out

This will place the output in file ps1.out, which you may then examine with the pico editor.

The file gnpdef.dat on /u/baum/761 contains quarterly observations on GNPDEF (the GNP implicit deflator) for 1918:1-1930:4 from Gordon (1985), in org=var format.

The file money.dat on the same directory contains annual observations on HPM (high-powered (base) money) and M (the money supply) for 1918-1930, in org=obs format.

Use the RATS procedure distrib.src (on /usr/local/rats/examples) to calculate several alternative quarterly versions of the HPM and M series (see the documentation within distrib.src for alternate specifications). Evaluate their statistical properties vis-a-vis the original annual series (e.g. first through fourth moments).

Use the Chow-Lin procedure (REStat, 1971, 53:372-375) to generate HPM and M series using GNPDEF as the associated series. (Hint: it is easiest to do this using undated data, allocating 5 times as many observations as you have annual observations). Evaluate the statistical properties of the resulting series.

Regress M on HPM at an annual frequency and for each of the sets of series generated above (by distrib and Chow-Lin) and evaluate these regressions' qualities. Consider the effects of working at a lower and higher frequency.