3300 Econometric HW obs RWAGES PRODUCT 1959 59.87100 48.02600 1960 61.31800 48.86500 1961 63.05400 50.56700 1962...

3300 Econometric HW

obs	RWAGES	PRODUCT
1959	59.87100	48.02600
1960	61.31800	48.86500
1961	63.05400	50.56700
1962	65.19200	52.88200
1963	66.63300	54.95000
1964	68.25700	56.80800
1965	69.67600	58.81700
1966	72.30000	61.20400
1967	74.12100	62.54200
1968	76.89500	64.67700
1969	78.00800	64.99300
1970	79.45200	66.28500
1971	80.88600	69.01500
1972	83.32800	71.24300
1973	85.06200	73.41000
1974	83.98800	72.25700
1975	84.84300	74.79200
1976	87.14800	77.14500
1977	88.33500	78.45500
1978	89.73600	79.32000
1979	89.86300	79.30500
1980	89.59200	79.15100
1981	89.64500	80.77800
1982	90.63700	80.14800
1983	90.59100	83.00100
1984	90.71200	85.21400
1985	91.91000	87.13100
1986	94.86900	89.67300
1987	95.20700	90.13300
1988	96.52700	91.50600
1989	95.00500	92.40800
1990	96.21900	94.38500
1991	97.46500	95.90300
1992	100.00000	100.00000
1993	99.71200	100.38600
1994	99.02400	101.34900
1995	98.69000	101.49500
1996	99.47800	104.49200
1997	100.51200	106.47800
1998	105.17300	109.47400
1999	108.04400	112.82800
2000	111.99200	116.11700
2001	113.53600	119.08200
2002	115.69400	123.94800
2003	117.70900	128.70500
2004	118.94900	132.39000
2005	119.69200	135.02100
2006	120.44700	136.40000

Problem 2.

Use the data in the “Autocorrelation” tab to test

For Autocorrelation using the Durbin Watson Test
Graph the Residuals and determine whether they are distributed normally or whether they are biased

Solutions

Expert Solution

We are going to use the Durbin Watson Test for testing the autocorrelation. I am using the Stata Software for applying the Durbin Watson test.

You don't have mentioned which of the variable is dependent variable. I am providing the results where once "product" is taken as dependent variable and another time "wages" is taken as dependent variable. Irrespective of the dependent variable, the DW test statistic would be the same.

The output is given in the picture below:

Here you can see that Durbin Watson statistic is 0.1463206.

Graphs: The graph of the residuals is given below.

I am attaching two different plots.

1. k-density plot

2. p-p plot

Along with that I ma going to apply the Shapiro -wilk Test to make sure whether the residuals are normally distributed or not.

Where H0 is r is normally distributed.

Here, p-value is 0.04159. Thus we reject H0. We found that residuals are not normally distributed.

milcah answered 8 months ago

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