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EC9100
THE UNIVERSITY OF WARWICK
May Examinations 2010/2011
Econometrics B

Time Allowed: 3 Hours
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1
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Explain, giving economic illustrations, the concept of cointegration and how
it can help to address this problem
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2
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Discuss why it would be
important for these tests that you also conduct other diagnostic tests of the equation,
and describe which additional tests would be useful
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Explain, with reference to an empirical economic illustration, how you would
formulate and estimate a suitable model for a binary choice facing a group of utilitymaximising consumers
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How would you test the distributional
assumption in the case of a probit model?

4
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Describe a simple model for endogenous selection and
explain how you would estimate it using a simple 2-step estimator
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1
(Continued)

EC9100

5
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How does the SVAR solve the problems associated with interpretability of the
VAR impulse responses? Describe an empirical application of an SVAR model that
you are familiar with
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6
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Describe how tests of
cointegration and Granger causality might also be used to test various aspects of the
expectations theory of the term structure
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Derive the effect of measurement error in an explanatory variable on the OLS
estimator of the impact of that variable on the dependent variable
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Show how an instrumental variable could be used to
solve the problem of measurement error in the explanatory variable
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8
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Show that the GARCH model corresponds to a (restricted) infinite order ARCH
model
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Show that the presence of ARCH/GARCH does not affect the
optimal point forecast of inflation when the loss function is squared error loss, but
will have an effect when the loss function is asymmetric, and explain the intuition for
this result

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