. The Gallup Poll frequently surveys the president. Since 1945, Gallup settled o
ID: 1130587 • Letter: #
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. The Gallup Poll frequently surveys the president. Since 1945, Gallup settled on the following wording of its presidential electorate to quantify the publie's opinion of the you approve of disa has not changed its presidentialc disapprove," or "no opinion You want to see how pprove of the way (name) is handling his job as president qo since then, and respondents can answer "approve The monthly survey, conducted with a minimum sam is approval rating is related to the Michigan index of consumer sen- le of 500, asks people if they feel "better /worse off" with regard to current and future conditions To estimate dynamic causal effects, you collect quarterly data from United States. You allow a binary variable for each presideneylude a change in ularity of the President. Furthermore, party for the presidency by using a which t h presideney to capt ure the intrinsic pop- the first quarter of the year afte%b binary variable, which takes on the value of one during the election. (The coefficients of these variables will not be reported here.) af o) [I Point) Asuning tiat conmunmer entiment is euogesholit arrelation two specifications (numbers in parenthesis are consistent standard errors): heteroskedasticity- and autocorrelation- Approval.-26.08 + 0.178 x Ics, + 0.232 × ICS'-i; R-0.667, SER = 7.00 (8.83) (0.120) (0.135) 7 Approval.-26.08 + 0.178 × 1cs, + 0.411 x ICs,-1; R2 = 0.667, SER (8.17) (0.120) (0.089) What is the difference between the two specifications? What is the advantage of esti- mating the second equation, if any? (b) [1 Point] Assuming that the errors follow an AR(1) process, you also estimate the fol- lowing alternative: Approval,-4.61 +0.300 × ICS,-0.070 × 1CSt-1-0054 x1CSt-2 +0.776 x Approvalt-1 (0.099) (0.084) (0.057) (5.84) (0.083) What assumption is required for the OLS estimator of this specification to be consistent? tion and the GLS estimator Approval.-_ 4.61 + 0.300 × ICS, _ 0.070 × ICSt-1, R2-0.868, SER = 4.45 (c) [1 Point]) You finally estimate the approval equation using the quasi-difference specifica- (5.84) (0.083) (0.099) where , , _ 1Zt-1 and 1 = 0.896. (0.040) Under the assumption of part (b), what advantage does the GLS estimator have over the OLS estimator for this specification? (d) [1 Point] Is it likely that ICS is exogenous here? Strictly exogenous?Explanation / Answer
a) The difference between the two specification is that first specification has consumer sentiment as an independent variable whereas in the second specification change in consumer sentiment has been taken as the independent variable. i.e., second model is first difference model.
b) For OLS estimator to be consistent, either the estimator should be unbiased or the esimator should have the minimum variance.
c) the advantage that GLS estimator have is that it does not have auto correlation problem.
d) yes, it is likely that ICS is exogeneous. But, It is not strictly exogeneous.
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