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Ees601: Quantitative Methods Ii Question Paper

Ees601: Quantitative Methods Ii

Course:Ph.D In Economics

Institution: Kenyatta University question papers

Exam Year:2012

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF DOCTOR
OF PHILOSOPHY IN ECONOMICS
EES 601:
QUANTITATIVE METHODS II
===============================================================
DATE: FRIDAY 30TH MARCH 2012

TIME: 2.00 P.M. – 5.00 P.M.

INSTRUCTIONS
Attempt ALL questions
All questions carry equal marks

Question 1
You are interested in explaining how Income (Y) influences the choice of health care
delivery. If there are three options as follows; self medication, Hospital and traditional
healer.

i)
Using a logit model demonstrate how the coefficients can be interpreted.
ii)
Assuming that the choices are collapsed to only two and a logit model yield in
In Q = 0.02 + 0.03 Y. Show that 0.03 is not a marginal effect
iii)
Assuming a scenario where in (ii) the probability of attending a formal health
care delivery is 0.6, how much a change in income is likely to influence choice of
health care delivery.

Question 2
a)
Given a timeseries model
Y ? X B ? u where u ~ IID ,
0
[
2
? ?), , ? ? ?
t
1
t
t

i)
Explain the effect of using OLS method in estimating the equation

Page 1 of 2
ii)
If the population variance is known, demonstrate that premultiplication by a
matrix P can solve the problem

iii)
Show this particular matrix P.

b)
Y ? ? B
? ? u where X and Y are matrices of endogenous and exogenous variables
respectively , demonstrate what would happen if someone was to run a regression
using CLS method directly.

Question 3
a)
Given a timeseries model with variables Y and X where both Yt and Xt are ?(o)

i)
Derive an impulse responses model and show this implication

ii)
Explain the concept of Granger causality and show how it can be tested.
iv)
Explain the distinction between Exogeneity and Granger causality

b)
y ? ? ? ? X ? u
t
o
1
t
T

Show DF test for unit root.

Question 4
a)
Given y ? ? ? X B ? u
i t
i
i t
i t
Compute the variance of y

Under
a)
Fixed effect
b)
Random effect

b)
i)
Explain the principle of Maximum – likelihood estimation
ii)
If Y ~ N(Y , 2
? u] show how you can use MLE to estimate all the unknown
parameters
Page 2 of 2

Ees601: Quantitative Methods Ii Question Paper

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