pls help pls
ECON 3314 ECONOMETRICS II
FINAL EXAM
DUE ON JUNE 6TH 2020 AT 20.20 AT THE LATEST
1. Consider the following model: 
where Y* = desired, or long-run, business expenditure for new plant and equipment, Xt = sales, and t = time.
Using the stock adjustment model: 
, where Y= actual business expenditure for new plant and equipment, the following regression was estimated using data over the 1955-1999 period:
t-stat (4.19) (3.73) (7.15)
a. Interpret the model conceptually and statistically.
b. What is the estimated coefficient of adjustment? How would you interpret it?
c. Write down the long run expenditure function.
d. Tets if there is serial correlation in the residuals.
e. Using the results below, determine whether plant expenditure Granger-causes sales or sales Granger-causes plant expenditure. Use 
. What important conclusion do you draw from this exercise?
| Null Hypothesis: | Obs | F-Statistic | Prob. | |
| Lags: 2 | Y does not Granger Cause X | 44 | 0.36911 | 0.6937 |
| X does not Granger Cause Y |
| 5.31396 | 0.0091 | |
| Lags: 3 | Y does not Granger Cause X | 43 | 0.10554 | 0.9563 |
| X does not Granger Cause Y |
| 3.28806 | 0.0316 | |
| Lags: 4 | Y does not Granger Cause X | 42 | 0.55897 | 0.694 |
| X does not Granger Cause Y |
| 4.53248 | 0.005 | |
| Lags: 5 | Y does not Granger Cause X | 41 | 1.29648 | 0.2917 |
| X does not Granger Cause Y |
| 4.81799 | 0.0024 | |
| Lags: 6 | Y does not Granger Cause X | 40 | 2.17751 | 0.0767 |
| X does not Granger Cause Y |
| 6.23389 | 0.0003 |
2. Consider the following macroeconomic model:
National income identity: 
Consumption function: 
Tax function: 
Investment function: 
Definition: 
Government expenditure: 
Exports: 
Imports: 
Definition: 
BoP (Balance of Payments) Curve: 
Current account: 
Capital account: 
Money demand function: 
Money supply function: 
Equilibrium condition: 
where Y = national income
C = consumption spending
I = planned or desired net investment
= given level of government expenditure
T = taxes
YD = disposable income
i= interest rate
CA = the current account
NX = net exports
= the foreign interest rate
k = the exogenous component of financial capital flows
= given level of money supply
e = the exchange rate
a. Make a list of the endogenous and exogenous variables in this system assuming flexible exchange rates.
b. Derive the IS, LM and BoP equations for this macroeconomic model.
c. Write down the reduced form of the model.
3. Determine the identifiability of the model in (question 2) with the aid of the order and rank conditions of identification.
4. What does the identification problem mean? What types of identification are there? Which method of estimation is appropriate for each? Briefly explain each method.
