Business, 28.07.2020 17:01 canddpotts

Use the data in TRAFFIC2 for this exercise. (i) Run an OLS regression of prcfat on a linear time trend, monthly dummy variables, and the variables wkends, unem, spdlaw, and beltlaw. Test the errors for AR(1) serial correlation using the regression in equation (12.20). Does it make sense to use the test that assumes strict exogeneity of the regressors?
(ii) Obtain serial correlation–and heteroskedasticity-robust standard errors for the coefficients on spdlaw and beltlaw, using four lags in the Newey-West estimator. How does this affect the statistical significance of the two policy variables?
(iii) Now, estimate the model using iterative Prais-Winsten and compare the estimates with the OLS estimates. Are there important changes in the policy variable coefficients or their statistical significance?

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Use the data in TRAFFIC2 for this exercise. (i) Run an OLS regression of prcfat on a linear time tr...

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