Answer to Question #197643 in Economics of Enterprise for MUZEMIL JOBRE

Question

A. Does identification state have any implication on the estimation of the econometric parameters? How? (1 point) 

B. What is the difference between autocorrelation and multicollinearity? (1 point) 

C. State briefly the four stages in econometric researches? (1 point) 

D. Discuss the difference between structural models and reduced form models? (2 point) E. Why do you study econometrics in your field of study? (2 point)

Answer 1

a) Yes.

Identification state has an implication on the estimation of econometric parameters. This is because and identification shows if structural parameters can be obtained or not.

b) Autocorrelation also known as serial correlation is the degree with which a variable correlates with another variable from one time interval to another.

Multicollinearity on the other hand is the phenomenon in which two or more predictor variables in a multiple regression model are highly correlated in such a manner that one can be predicted from the other.

c) 4 stages in Econometric Researches i) Specification of the model

• Identifying dependent and independent variables
• Determining behaviour of variables
• Obtaining mathematical expression of the variables.

ii) Obtaining numerical Estimates

• Collection of data
• Examine aggregation problem
• Selecting appropriate econometric method.

iii) Test reliability of the estimated parameters

• Method of economic theory
• Statistical method
• Econometric method

iv) Evaluating validity of the model

Reduced form model

The reduced form of a model is the one in which the endogenous variables are expressed as functions of the exogenous variables.

Structural Model

These models are often derived from theory and they include unobservable parameters that help to describe behaviour at a deep level.

Need for studying Econometrics

•  It allows to you critically assess the empirical work during researches.
• Once you understand it you can comfortably conduct econometrics research easily and satisfactorily.
• It boosts human capital such that even during dissertations you find it easy doing the researches and write-ups