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

Subject | Business |

Due By (Pacific Time) | 12/09/2015 12:00 am |

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