Economics

Economics

Wildcats are wells drilled to find and produce oil and/or gas in an improved area

or to find a new reservoir in a field previously found to be productive of oil or

gas or to extend the limit of a known oil or gas reservoir.

The variables in the table are defined as follows:

Y = the number of wildcats drilled

X2 = the price of the wellhead in the previous period

(In constant dollars: 1980 = 100)

X3 = domestic output

X4 = GNP at constant dollars (1980 = 100)

X5 = trend variable, 1948 = 1, 1949 = 2, …1978 = 31

Consider the regression model based on this equation:

Yt = b1 + b2X2t + b3X3t + b4X4t + b5X5t + u t    — (1)

(a)     Run the regression equation (1) above in EViews 8 and show the regression

result.

[3 marks]

(b)       Explain the regression equation (1) above in terms of economic

relationship between the dependent and independent variables. State and explain the

expected signs of the coefficients of this model?

[5 marks]

(c)       Interpret the OLS regression results shown above in terms of:

(i)              Economic interpretation of the results.

[8 marks]

(ii)            Econometric/statistical interpretation of the results.

[6 marks]

(d)       Are the empirical results in accordance with prior expectations? Explain

[3 marks]

[Total marks: 25

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