Department of Economics
Autumn Semester 2023-2024
ECN6540 Econometric Methods
Coursework
The answers to the questions must be type-written. The preference is that symbols
and equations should be inserted into the document using the equation editor in Word.
Alternatively, they can be scanned and inserted as an image (providing it is clear and
readable). Maximum words 1,500 excluding any Stata output and commands.
The coursework comprises two questions where the second is a short Stata
assignment. ANSWER ALL QUESTIONS. Both questions 1 and 2 carry equal weight
and the marks shown within each question indicate the weighting given to component
sections. Any calculations must show all workings otherwise full marks will not be
awarded. In question 2 all Stata output should be shown.
Coursework must be submitted online through Blackboard using Turnitin and by no
later than 12.00 noon on the deadline. Coursework submitted after the 12.00 noon
deadline will have a late penalty applied. Details about the late penalty policy can be
found in the Student Handbook.
You must attach a submission template coversheet to the front of your work when
submitting it to Turnitin to avoid a 5% penalty. Full details of this policy can be found
in the Student Handbook.
Please ensure that you have read the assessment guidelines provided in the Student
Handbook, including the guidance about submission requirements, extension
requests and extenuating circumstances and the use of unfair means.
Use of any generative AI tools in the preparation of the answer to this work is not
permitted.
PLEASE WRITE YOUR STUDENT REGISTRATION NUMBER IN THE
SUBMISSION TITLE BOX AND USE THIS AS THE FILENAME YOU UPLOAD.
STATA ASSIGNMENT
2. The data is given in the Stata file ECN6540_Assignment.dta,
which is time series data for the U.S. over the period 1986 to 2001
(year is the time identifier in the data). Variables in the data are
defined as follows: Y is sales of beer per capita; X1 is the tax rate
on beer (%); and X2 is disposable income (in dollars, $).
a.
Load the data into Stata. Then type the following commands where
the number after "set seed" is your student registration number
e.g. 200212232 (this ensures that each student has unique data):
set seed 200212232
replace X2=X2*abs(rnormal(0,1))
save “ECN6540_Assignment_mydata.dta”, replace
Load your unique data set into Stata:
use “ECN6540_Assignment_mydata.dta”, clear
To achieve full marks in the questions which follow all Stata output
must be provided.
Estimate a model of beer sales per capita conditional on beer tax
and income, i.e. ௧ ൌ ଴ ൅ ଵଵ௧ ൅ ଶଶ௧ ൅ ௧. Present the
estimates of your model and interpret the results. For disposable
income base the interpretation on a $10,000 increase in income.
Based upon the sample means calculate tax and income
elasticities.
Undertake the Durbin Watson test for autocorrelation at the 1%
level and interpret your findings.
Undertake the White test for heteroscedasticity at the 5% level
(without using any inbuilt Stata test commands).
Now re-estimate the model from part (a) to allow for the inclusion
of a lagged dependent variable and a quadratic term in income,
i.e. ௧ ൌ ௧ିଵ ൅ ଴ ൅ ଵଵ௧ ൅ ଶଶ௧ ൅ ଷଶ௧ଶ ൅ ௧.
i) What does the quadratic term in income suggest?
ii) Test for autocorrelation at the 5% level (without using any
inbuilt Stata test commands).
At the end of the coursework provide the text from your Stata *.do
file in the word document.