## Topic: Modelling Techniques essay

Writing instructions
The assignment is the following two questions, one of which comes from the textbook.

Question 13 from Chapter 6 in the book (see the end of Chapter 6). The data you need are the same data as for Question 13 Chapter 5 https://www.profhalcoussis.com/econ-409-data (Links to an external site.). Include your gretl output and your answers to the four parts (a, b, c, d) of Question 13.

1. This question involves a time-series regression concerning gasoline consumption.

In Gretl, click on “file”, then “open data”, and then “sample file.” You’ll see three tabs towards the top of the window; pick the one that says “greene”. Choose the data set called “greene7_8 Gasoline Price and Consumption”

Construct a new variable called “gpop” that is gasoline consumption per capita or per person. (Hint1: click on “add.” Hint2: Variable names in gretl are case sensitive.)

a. Use OLS to estimate a model where gpop is the dependent variable and Pg, Y, Pnc, and Ppt are independent variables. Include this output when you turn in the homework.

b. Is there autocorrelation? Use the Durbin-Watson statistic and explain how you knew the answer.

c. Run the same model using Cochrane-Orcutt to correct for autocorrelation (hint: it’s under time series, AR(1).) Include these results with your answers.

d. Is there autocorrelation now? Use the Durbin-Watson statistic and use proper statistical procedure to find the answer, explain.

e. What false conclusion would one come to, if the autocorrelation hadn’t been corrected?

Pages: 2 Double spaced (550 words)
Style and sources: Not Applicable, No sources
Free extras: N/A
Study level: Bachelor
Assignment type: Essay