EC316 topics in macroeconomics & time series econometrics final exam 2022
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EC316 topics in macroeconomics & time series econometrics
final exam
2022
SECTION A (20%)
Answer ALL questions in this section
We recommend spending no more than 30 minutes on Section A.
The word limit on each question is 200 words, however, it is possible to write an excellent answer which is shorter than this.
State whether each of the following statements is True, False or Uncertain, and explain your answer.
Question 1
Governments have delegated monetary policy to an independent central bank in order to remove the incentives associated with the time inconsistency of monetary policy. [10%]
Question 2
Countries with a common currency are not able to experience an asymmetric demand shock. [10%]
SECTION B (80%)
Answer ALL questions in this section
The word limit on each part is provided below, however, it is possible to write an excellent answer which is shorter than this.
Equations and figures are not included in the word limit.
Question 3
a) Explain what is meant by autocorrelation. [5% : %: 100-word limit]
b) Write out the two equations that make up the AR(1) and GARCH(1,1) model for which output is provided below. Interpret the results. [20 %: 400-word limit]
Model 1: GARCH, using observations 1985:02-2016:01 (T = 372) Dependent variable: Returns
Standard errors based on Hessian
|
|
Coefficient |
Std. Error |
z |
p-value |
|
|
const |
0.562685 |
0.197211 |
2.853 |
0.0043 |
*** |
|
Returns_1 |
-0.06775 |
0.056447 |
-1.200 |
0.2300 |
|
|
alpha(0) |
0.749340 |
0.428479 |
1.749 |
0.0803 |
* |
|
alpha(1) |
0.144121 |
0.0426759 |
3.377 |
0.0007 |
*** |
|
beta(1) |
0.831218 |
0.0400290 |
20.77 |
<0.0001 |
*** |
c) Explain what is meant by volatility clustering. [5% : 100-word limit]
Question 4
We recommend spending no more than 45 minutes on this question.
a) Explain why banks’ leverage ratios had typically been increasing in the run-up to the Great Recession. [10 %: 200-word limit]
b) How did a crisis in part of the US housing market transmit into a global recession between 2007 and 2008? You may wish to discuss the impact of changes in trade, the global nature of banks and bank risks, and the credit markets in your answer. [15 %: 300-word limit]
Question 5
We recommend spending no more than 45 minutes on this question.
a) Why might countries choose to run public deficits? [10 %: 200-word limit]
b) Can you identify if a government is overspending simply by looking at whether it is running a surplus or deficit? [15 %: 300-word limit]
2022-05-06