Paper Code: ECON 312 Page 1 of 15 Paper Code: ECON 312 Department: ULMS Examiner: Yao Rao Tel. No: 53728 JANUARY EXAMINATIONS 2018 ECON 312 Methods of Economic Investigation II: Microeconometrics TIME ALLOWED: Two Hours INSTRUCTIONS TO CANDIDATES The use of pre-programmable calculators is not permitted during this exam. Enter your name and student ID number IN PENCIL on the computer sheet according to the instructions on that sheet. The digits should be entered in the boxes under “Student ID Number” and entered by means of horizontal lines in the appropriate boxes underneath, exactly as when answering questions. NAME OF STUDENT__________________________________________________________ STUDENT ID NUMBER_______________________USUAL SIGNATURE________________ INSTRUCTIONS TO CANDIDATES 1. Answer All the questions in Section A and Section B. 2. Selected formulas and statistics tables are attached 3. You must show all workings clearly. 4. At the end of the examination, both exam scripts and exam question paper must be handed in before your leave the exam room. Paper Code: ECON 312 Page 2 of 15 JANUARY EXAMINATIONS 2018 ECON 312 Methods of Economic Investigation II: Microeconometrics (Use 5% significance level unless otherwise indicated) Section A Question 1 Like credit cards, debit cards are now used extensively by consumers. Vendor prefer them because when you use a debit card, the amount of your purchase is automatically deducted from your checking or other designated account. To found out what factors determine the use of the debit card, we obtained data on 60 customers and considered the following model: iiiii uXXXY 433221 Where Y =1 for debit c
ard holder, 0 otherwise; 2X =account balance in dollars; 3X = number of ATM transactions; 4X =1 if interest is received on the account, 0 otherwise. The following table summarizes the estimated linear probability model (LPM), Logit models (standard errors are in parentheses below the estimated coefficients). Dependant Variable: Debit Independent variables LPM Logit Constant 0.3631 (0.1796) -0.57490 (0.785787) Balance 0.00028 (0.00015) 0.001248 (0.000697) ATM -0.0269 (0.208) -0.120225 (0.093984) Interest -0.3019 (0.1448) -1.352086 (0.680988) R-square 0.1056 0.0804 Paper Code: ECON 312 Page 3 of 15 a) In LPM model, explain whether the signs of explanatory variables (except intercept) are consistent with your expectation. Are all the variables statistically significant (6 marks) b) The second customer in the data having $500 balance in the account, and number of ATM transactions is 3; the account does receive interests. Based on LPM and Logit estimates, what are the probability, respectively, that this customer will hold the debit card (5 marks) c) Based on the output table, calculate respectively for LPM and Logit model, the marginal effect of a one extra dollar deposited in the account on the probability of the customer described in b) holding the debit card. (5 marks)