Exercises Series N°3 Solution

Mohamed Khidher University
Faculty of economics, Commercial Specialty: International Commerce & Finance

and Management Sciences Module: Time Series Analysis
Department of commerce Academic year 2023/2024
Exercise 1 solution: The right answer to each question is as follow
1. Econometrics uses _____ and _____ to identify factors and create models using economic
data.
a. Theory, models
b. Theories, rules
c. Statistics, mathematics
d. Experimentation, models
2. In econometrics, one of the tools used to create a model with multiple inputs is called __.
a. Regression analysis
b. Algebra
c. Hypothesis
d. Descriptive statistics
3. A researcher wants to create a study to see why a certain area of town has more revenue from
tourism than another. What should He use?
a. Mathematical techniques
b. Statistics
c. Econometrics
d. None of these
4. Econometrics is_________________?
a. Statistical analysis of economic relationships.
b. Mathematical analysis of economic relationship.
c. Both a and b
d. None of the above.
5. Why do researcher use sample?
a. To simplify statistical tests.
b. To get more accurate results.
c. To simplify conducting statistical tests on a very large sample.
d. All of the above.
6. Which is not a phenomena studied under econometrics?
a. Consumption variation over period of time.
b. Consumer behavior.
c. Production and cost relationship.
d. Money Supply Path.
8. Apart from regression model, econometrics relies on..?
a. Null hypothesis.
b. Data testing.
c. Data interpretation.
d. All the above.
9. Which is a basic tool of econometric..?
a. Simple linear regression model.
b. Multiple linear regression model.
c. General linear model.
10. the standard deviation measure how the data are far from the mean?
a. True
b. False
11. We say two variable tend to move together if_______?
a. The covariance is negative
b. The standard deviation is positive.
c. If the covariance is positive
10 .The cross sectional data is a cross section of individuals at different points in time?
a. True
b. False
If false correct the mistake, the cross sectional data is a sample of individual section taken @ a
given point in time.
11. Panel Data is observation of variable or several variables over time?
a. True
b. False
If false correct the mistake, Panel data is a time series for each cross sectional member
12. The set of time series data for each cross sectional member is Panel data?
a. Pooled data
b. Cross sectional data
c. Time series data
d. Panel data
Exercise 2 solution
1- As workers are paid based on their productivity and the productivity might be influenced by
year of education, years of workforce experience and week spent in Job training, so we can
say that these three factors might have effect on wage. So, model can be as follow:
𝑓 = (𝑒𝑑𝑢𝑐, 𝑒𝑥𝑝𝑒𝑟, 𝑡𝑟𝑎𝑖𝑛𝑖𝑛𝑔)
𝑤𝑎𝑔𝑒 = 𝛼 + 𝛽! 𝑒𝑑𝑢𝑐 + 𝛽" 𝑒𝑥𝑝𝑒𝑟 + 𝛽# 𝑡𝑟𝑎𝑖𝑛𝑖𝑛𝑔 + 𝜀

2- Hypothesis of study:
𝐻$ : 𝛽! = 0 years of education do not affect wage

𝐻! : 𝛽! ≠ 0 Years of education affect the wage
𝐻$ : 𝛽" = 0 years of workforce experience do not affect wage

𝐻! : 𝛽" ≠ 0 Years of workforce experience affect the wage
𝐻$ : 𝛽# = 0 week spent in Job training do not affect wage

𝐻! : 𝛽# ≠ 0 week spent in Job training affect the wage
3- The kind of the data is cross-sectional data, because he observes some variable for a sample of
worker at a given point in time.
4- The economist starts from the theory that the productivity affects wage and the productivity
is affected by the factor such as education level, years of workforce experience and job
training; then he builds model based on this theory:
𝑤𝑎𝑔𝑒 = 𝛼 + 𝛽! 𝑒𝑑𝑢𝑐 + 𝛽" 𝑒𝑥𝑝𝑒𝑟 + 𝛽# 𝑡𝑟𝑎𝑖𝑛𝑖𝑛𝑔 + 𝜀
Then in the third step, the economist put the hypotheses about the significance of the
coefficient of the model. The fourth step collect data for each variable within the model,
introduce this data in the software and conduct the appropriate tests, get the results as in
the following table, the final step is the interpretation
5- From the table we can write the following equation:

𝑤𝑎𝑔𝑒 = 34.71 − 0.943𝑒𝑑𝑢𝑐 + 0.089𝑒𝑥𝑝𝑒𝑟 + 0.161𝑡𝑟𝑎𝑖𝑛𝑖𝑛𝑔
According to the equation above and the p-value the years of formal education has no
significant impact on the wage so, we confirm the null hypothesis;
According to the equation above and the p-value, the years of workforce experience has a
significant positive impact on wage, as one unit increase (decrease) in experience increases
(decreases) the wage by 0.0895 unit, in this case we reject the null hypothesis at 1% level of
significance.
Finally, the week spent in job training has a significant positive impact on wages. A one-unit
increase (decrease) in training is associated with a 0.161 unit increase (decrease) in wages. In
this case, we reject the null hypothesis at a 1% level of significance.
The training variable has a stronger impact on wages than the other variables, as its coefficient
has the highest value in the regression
The value of R-squared 0.2429, this value means that the independent variable educ., exper.
and training explain 24.29% of the variation in the dependent variable (wage)

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Mohamed Khidher University

Faculty of economics, Commercial Specialty: International Commerce & Finance

Exercise 1 solution: The right answer to each question is as follow

𝑤𝑎𝑔𝑒 = 𝛼 + 𝛽! 𝑒𝑑𝑢𝑐 + 𝛽" 𝑒𝑥𝑝𝑒𝑟 + 𝛽# 𝑡𝑟𝑎𝑖𝑛𝑖𝑛𝑔 + 𝜀

𝐻$ : 𝛽! = 0 years of education do not affect wage

𝐻$ : 𝛽" = 0 years of workforce experience do not affect wage

𝐻$ : 𝛽# = 0 week spent in Job training do not affect wage

5- From the table we can write the following equation:

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