Basic econometric models Flashcards

1
Q

Whats the equation for a basic econometric model?

A

y=a+BX+u

a = alpha and B = Beta

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2
Q

Why can we not find exact estimates of the relationship between the unknown parameters?

A

Because of the random error

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3
Q

What is the random error in the relationship?

A

u

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4
Q

In the DGP equation, Y and u are:

A

Random vairables

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5
Q

In the DGP equation, what are alpha and Beta?

A

fixed (but unknown) population parameters

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6
Q

What does Y = a + BX + u define?

A

The data generation process (DGP)

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7
Q

What are estimates of Alpha and Beta based on sample data?

A

Random variables

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8
Q

What does the distribution of a and B depend on?

A

distribution of the random disturbances u

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9
Q

What is cross section data?

A

Observing data for different agents

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10
Q

What is time series data?

A

Observing data for one agent at different points in time

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11
Q

Whats an example of cross section data?

A

GDP across different countries

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12
Q

Whats an example of time series data?

A

UK GDP across a number of years

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13
Q

What is a random experiment?

A

An experiment whose outcome cannot be predicted with certainty

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14
Q

What is a random variable?

A

A quantity who’s value depends on the outcome of a set of possible random events

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15
Q

What does a probability distribution specify?

A

The probability that the value of the variable falls within given intervals

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16
Q

What is a Bernoulli trial?

A

A special kind of experiment in which the outcome can be classified as either success or failure

17
Q

What is the relative frequency?

A

The number of successes observed in n Bernoulli trials