0 Part 5. Questions 23-25. Trade, growth, and development with panel data. model: You have a panel with 185 countries an

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0 Part 5 Questions 23 25 Trade Growth And Development With Panel Data Model You Have A Panel With 185 Countries An 1 (29.97 KiB) Viewed 12 times

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0 Part 5. Questions 23-25. Trade, growth, and development with panel data. model: You have a panel with 185 countries and 10 years (from 1996 to 2005), and you want to estimate the following econometric GROWTH-a +A+BTRADE + that where the variable GROWTH is the rate of growth of per-capita GDP for country Lat time t, TRADE denotes the ratio of exports plus imports to GDP for country i at time t. We also observe dummy variables DEV, EM,, and POOR, which indicate a country's level of development: DEV; takes the value of 1 if country i is developed (0 otherwise), EM, is 1 it country i is an emerging economy (0 otherwise), and POOR, is 1 if country i is classified as poor (0 otherwise). Each country must be classified into one of the 3 categories (hence DEV+EM+POOR-1 always holds). The parameters a, and A denote entity and time fixed effects, respectively. Question 23 3 pt-

D Question 23 Note that the panel data specification does not include the development dummies DEV,, EM,, and POOR. Should they be included? O a) Wes, because we know that they affect growth and may also be related to trade, so we may be subject to omitted variable bas ON No, because the model already includes entity foxed effects, which control for all those variables that change across entities but not over time (such as the development dummies). Od No, because the model includes time fixed effects, which control for the level of development dummies. O Yes, because these variables change across both entities and time. Question 24 CROWTH We believe that the effect of trade depends on a country's level of development. Which of the following specifications would you run to account for this? Select all that apply. OTDADD 3 pts 2 TRADE DEY 4 pts

d) Od e) e) d) b) C b) a) Question 24 We believe that the effect of trade depends on a country's level of development. Which of the following specifications would you run to account for this? Sefect all that apply. GROWTH-0₂+A+BTRADE+TRADE +8,TRADE EM,+TRADE, GROWTH o+A+TRADE +TRADE POOR+M DEV POOR,+ wa DEV+3₂TRADE-EM, GROWTH-a,+A+BTRADE+BTRADE DEV + ATRADE EM,+ GROWTH =a +A+B₁TRADE + BTRADE, DEV +BaTRADE POOR,+pa GROWTH =a + + B₁ DEV + B₂EM, + B₂TRADE DEV, +BTRADE EM,+Pa

D Question 25 We are running panel regression with individual fixed effects a, and time fixed effects A. When running such regression we be certain that there is no omitted variable bias? O No, there still can be additional variables in the error term which vary across time and entities and are also correlated with the incl regressors.. O No, there can be unknown individual fixed effects. Yes, both fixed effects always captures unobserved variables. No new data to save. Last checked.