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EMU
Department of Economics
ECON 503: Econometrics I, Fall 2008
Instructor: Mehmet Balcilar
Computing Exercise #8
(1) Gujarati (2003) #9.3, pp. 325, Table 9.7 gives the quarterly data on unemployment
rate and job vacancy rate in the US. Besides the questions from the textbook, we
may also want to understand whether there is any seasonal effect and differences on
the unemployment rate in the US.
(i) First to define the seasonal (or quarterly) dummy variables
(ii) Rune the regression with dummy variables
(iii) Measure the estimated result for each quarter.
(2) Gujarati (2003) #9.24, pp.331, Table 9.8 gives data on quadrennial presidential
elections in the United States from 1916 to 1996. The variables are defined as:
Year = Election year
V = Democratic share of the two-party presidential vote
I = Indicator variable (1 if there is a Democratic incumbent at the time of the
election,-1 if there is a Republican incumbent)
D = Indicator variable (1 if a Democratic incumbent us running for election,
-1 if a Republican incumbent is running for election and 0 otherwise)
W = Indicator variable (1 for the elections of 1920, 1944, 1948, and 0 otherwise)
G = Growth rate of real per capita GDP in the first 3 quarters of the election year.
P = Absolute value of the growth rate of the GDP deflator in the first 15 quarters of
the administration
N = Number of quarters in the first 15 quarters of the administration in which the
growth rate of real per capita GDP is greater than 3.2%
a. Using the data given in Table 9.8 to develop a suitable model and predict the
Democratic share of the two-party presidential vote.
b. How would you use this model to predict the outcome of a presidential election?
c. Chatteejee et al. (2000) suggested considering the following model as a trial model
to predict presidential elections:
V  1   2 I   3 D   4W   5 (G * I )   6 P   7 N  u
Estimate this model and comment on the results in relations to the results of the
model you have chosen in (a).