EXERCISES . 347

] for second quarter etc.

„ , . f] for second

= seasonal dummy = .

SEE = CT

(a) What is the estimated seasonal pattern in the commercial paper rate?

(b) About how much would drop if P,/P,-4 were dropped from the equation?

(c) Will R increase or decrease if P,lP,-4 is dropped?

(d) Instead of using P,IP, 4, suppose that we use the percentage rate of inflation , defined by

, = 100

-4 /

What will be the new coefficients and their standard errors?

7. You are asked to estimate the coefficients in a linear discriminant function. You do not have a computer program for this. All you have is a program for multiple regression analysis. How will you compute the linear discriminant function?

8. Consider a model with a zero-one dependent variable. You have a multiple regression program and a program for the logit and probit models. You have computed the coefficients of the Unear probabiUty model and the logit and probit models:

(a) How will you transform the coefficients of the three models so that they are comparable?

(b) How will you compute the i?s for the three models?

(c) By what criteria will you choose the best model?

9. Explain how you will formulate a model explaining the following. In each case the sample consists of some observations for which the dependent variable is zero. Suggest a list of explanatory variables in each case.

(a) Automobile expenditures (in a year) of a number of families.

(b) Hours worked by a group of married women.

(c) Amount of child support received by a number of working wives.

(d) Medical expenditures of a number of families.

(e) Amount of loan granted by a bank to a number of appUcants.

(f) Amount of financial aid received by a group of students at a college.

10. Table 8.7 presents data on bride and bride-groom characteristics and dowries for marriages in rural south-central India.The variable definitions follow the table:

(a) Estimate an equation explaining the determinants of the dowry.

(b) Estimate probit and tobit equations explaining the determinants of brides years of schooling and grooms years of schooUng.

"The data have kindly been provided by Anil B. Deolalikar. They have been analyzed in A. B. Deolalikar and V. Rao, "The Demand for Dowries and Bride Characteristics in Marriage: Empirical Estimates for Rural South Central India." Manuscript, University of Washington, September 1990.

Table 8.7 Data Set on Bride-Groom Characteristics and Dowry Icrisat VLS Data, South-Central Rural India