## ASB3317 Theoretical and Practical aspects of Econometrics

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Assignment Details:-

• Course Code: ASB3317
• Course Title: Econometrics
• Referencing Styles: Harvard
• Words: 4250
• University: Singapore Institute of Management
• Country: SG

The Solow model predicts that growth rates depend on the starting level of GDP, the population growth rate and the rate of investment such that:

1. Obtain estimates of the OLS estimators α and β for the regression only for the developed (developing) countries if your ID number is odd (even) for the year 2010.The growth rate is calculated as the average growth rate of real GDP ratio between 1970-2010. All variables are in natural logs.
2. Add the variable population growth, which is the average population growth rate between 1970-2010 and the GDP per capita of the year 1970 in your model and estimate it again. Comment on the sign and significance of all the coefficient estimates. Outline the economic intuition underlying your results. Are they consistent with empirical literature? Explain.
3. For each of the following questions formulate a null hypothesis and test your equation:
• Investment is the only determinant of growth
• The relationship between the population growth rate and Economic Growth is equal to 0.2
• GDP in 1970 and population growth have the same effect on economic growth.
4. After investigating the related empirical literature, add an extra variable from the dataset that you have not used in your model. What are the estimates? Are they line in it?
5. Test for Heteroskedasticity. If it is present, correct it.
6. Divide the countries of your sample in regions/continents. Estimate your model, adding the continents’ variable in the model. Do you find any differences? Explain.
7. Interact with the continent dummies with the variable investment. Comment and Interpret the coefficients.
8. Discuss whether endogeneity issues are present. If yes, how you can solve them, discuss using the existing literature.
9. Run your model, including all the years from 1970 to 2010. Illustrate and discuss the model and the suitable estimation method you used. Do you find any different estimates from the question (2)? Explain.