"Heteroskedasticity typically occurs in cross-sections, while serial correlation is typically observed in time-series data." Discuss and critically evaluate this statement
What will be an ideal response?
Answer: Serial correlation in cross-sections can occur by chance if the data is ordered using one of the regressors. While it is easy to get rid of serial correlation in this case by simply "reshuffling" the data, the serial correlation contains some information, such as a possible misspecification of functional form.
Serial correlation does occur typically in time-series data, but as the textbook emphasized, conditional heteroskedasticity "shows up in many economic time series." The ARCH and GARCH models are often used when volatility clustering is present in financial time series, including the inflation rate. Hence this special type of heteroskedasticity is observed in time-series data.
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A) Individual income taxes and corporate income taxes B) Transfers from federal government and sales taxes C) Individual income taxes and sales taxes D) Transfers from federal government and corporate income taxes E) Corporate income taxes and lottery income
Like the supply curve for individual goods and services, the aggregate supply curve slopes upward and to the right
a. True b. False Indicate whether the statement is true or false
Financial intermediaries that are collected pools of funds from many investors are called: a. mutual funds. b. banks
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Sweden is:
A. not a member of the Euro system or the European Union. B. a member of the Euro system but not a member of the European Union. C. a member of the European Union but not a member of the Euro system. D. a member of both the European Union and the Euro system.