Instructor’s Manual
For Principles of Econometrics, Fourth Edition
,Instructor’s Manual
For Principles of Econometrics, Fourth Edition
WILLIAM E. GRIFFITHS
University of Melbourne
R. CARTER HILL
Louisiana State University
GUAY C. LIM
University of Melbourne
SIMON YUNHO CHO
University of Melbourne
SIMONE SI-YIN WONG
University of Melbourne
JOHN WILEY & SONS, INC
New York / Chichester / Weinheim / Brisbane / Singapore / Toronto
,PREFACE
This Instructor’s Manual contains solutions to the Exercises in the Probability Primer, Chapters 2-
16 and Appendices A, B and C in Principles of Econometrics, 4th edition, by R. Carter Hill,
William E. Griffiths and Guay C. Lim (John Wiley & Sons, 2011).
There are several other resources available for both students and instructors. Full details can be
found on the Web page http://principlesofeconometrics.com/poe4/poe4.htm. These resources
include:
Answers to Selected Exercises. These answers are available to both students and
instructors. They are shortened versions of the solutions in this Manual for exercises that
are marked in POE4 with a *.
Supplementary computer handbooks designed for students to learn software at the same
time as they are using Principles of Econometrics to learn econometrics. These
handbooks are available for the following software packages:
EViews
Stata
GRETL
Excel
SAS
Data files for all text examples and exercises. The following types of files are available:
Data definition files (*.def) are text files containing variable names, definitions
and summary statistics.
Text files (*.dat) containing only data. Variable names are in *.def files.
EViews workfiles (*.wf1) compatible with EViews Versions 6 or 7.
Stata data sets (*.dta) readable using Stata Version 9 or later.
Excel spreadheets (*.xlsx) for Excel 2007 or 2010.
GRETL data sets (*.gdt).
SAS data sets (*.sas7bdat) compatible with SAS Version 7 or later.
We welcome any comments on this manual. Please feel free to contact us if you discover errors or
have suggestions for improvements.
William E. Griffiths Simon Yunho Cho
R. Carter Hill Simone Si-Yin Wong
Guay C. Lim
October 1, 2011
, CONTENTS
Solutions to Exercises in:
Probability Primer 1
Chapter 2 The Simple Linear Regression Model 21
Chapter 3 Interval Estimation and Hypothesis Testing 54
Chapter 4 Prediction, Goodness of Fit and Modeling Issues 97
Chapter 5 The Multiple Regression Model 132
Chapter 6 Further Inference in the Multiple Regression Model 178
Chapter 7 Using Indicator Variables 225
Chapter 8 Heteroskedasticity 271
Chapter 9 Regression with Time Series Data: Stationary Variables 308
Chapter 10 Random Regressors and Moment Based Estimation 360
Chapter 11 Simultaneous Equations Models 387
Chapter 12 Regression with Time Series Data: Non-Stationary Variables
424
Chapter 13 Vector Error Correction and Vector Autoregressive Models 448
Chapter 14 Time-Varying Volatility and ARCH Models 472
Chapter 15 Panel Data Models 489
Chapter 16 Qualitative and Limited Dependent Variable Models 527
Appendix A Mathematical Tools 576
Appendix B Probability Concepts 586
Appendix C Review of Statistical Inference 604
For Principles of Econometrics, Fourth Edition
,Instructor’s Manual
For Principles of Econometrics, Fourth Edition
WILLIAM E. GRIFFITHS
University of Melbourne
R. CARTER HILL
Louisiana State University
GUAY C. LIM
University of Melbourne
SIMON YUNHO CHO
University of Melbourne
SIMONE SI-YIN WONG
University of Melbourne
JOHN WILEY & SONS, INC
New York / Chichester / Weinheim / Brisbane / Singapore / Toronto
,PREFACE
This Instructor’s Manual contains solutions to the Exercises in the Probability Primer, Chapters 2-
16 and Appendices A, B and C in Principles of Econometrics, 4th edition, by R. Carter Hill,
William E. Griffiths and Guay C. Lim (John Wiley & Sons, 2011).
There are several other resources available for both students and instructors. Full details can be
found on the Web page http://principlesofeconometrics.com/poe4/poe4.htm. These resources
include:
Answers to Selected Exercises. These answers are available to both students and
instructors. They are shortened versions of the solutions in this Manual for exercises that
are marked in POE4 with a *.
Supplementary computer handbooks designed for students to learn software at the same
time as they are using Principles of Econometrics to learn econometrics. These
handbooks are available for the following software packages:
EViews
Stata
GRETL
Excel
SAS
Data files for all text examples and exercises. The following types of files are available:
Data definition files (*.def) are text files containing variable names, definitions
and summary statistics.
Text files (*.dat) containing only data. Variable names are in *.def files.
EViews workfiles (*.wf1) compatible with EViews Versions 6 or 7.
Stata data sets (*.dta) readable using Stata Version 9 or later.
Excel spreadheets (*.xlsx) for Excel 2007 or 2010.
GRETL data sets (*.gdt).
SAS data sets (*.sas7bdat) compatible with SAS Version 7 or later.
We welcome any comments on this manual. Please feel free to contact us if you discover errors or
have suggestions for improvements.
William E. Griffiths Simon Yunho Cho
R. Carter Hill Simone Si-Yin Wong
Guay C. Lim
October 1, 2011
, CONTENTS
Solutions to Exercises in:
Probability Primer 1
Chapter 2 The Simple Linear Regression Model 21
Chapter 3 Interval Estimation and Hypothesis Testing 54
Chapter 4 Prediction, Goodness of Fit and Modeling Issues 97
Chapter 5 The Multiple Regression Model 132
Chapter 6 Further Inference in the Multiple Regression Model 178
Chapter 7 Using Indicator Variables 225
Chapter 8 Heteroskedasticity 271
Chapter 9 Regression with Time Series Data: Stationary Variables 308
Chapter 10 Random Regressors and Moment Based Estimation 360
Chapter 11 Simultaneous Equations Models 387
Chapter 12 Regression with Time Series Data: Non-Stationary Variables
424
Chapter 13 Vector Error Correction and Vector Autoregressive Models 448
Chapter 14 Time-Varying Volatility and ARCH Models 472
Chapter 15 Panel Data Models 489
Chapter 16 Qualitative and Limited Dependent Variable Models 527
Appendix A Mathematical Tools 576
Appendix B Probability Concepts 586
Appendix C Review of Statistical Inference 604
