Set A

Assignment

International Islamic University Chittagong

Department of Economics & Banking
Autumn-2020
Program: BSS (Hons.) in Economics & Banking
Course: Econometric Methods and Applications (ECON-4810)

Instruction: Students bearing even ID will answer set A, and students bearing odd ID
will answer set B

Marks- 20 Time- 1 Hour

1. a) Why do you use multiple regression model instead of a simple regression 2

model?
b) How is the goodness of a model judged? Do you think that the increase in 3
the number of explanatory variable would increase goodness of a model?
What adjustment is made then?
c) Application of OLS process on 500 observations related to demand (Q), 5
price (P) and income (M) provides: SST = 2030, SSE=750. Compute
adjusted coefficient of determination.

2. a) Describe the situations when you are necessarily required to use 3

i. t-statistic
ii. F-statistic.
Under what condition t- or F- can be alternatively used?
b) Suppose, two explanatory variables x2 and x3 maintain the following linear
relation:
x2 = 5x3.
Show that, in this case, OLS estimation approach breaks down. 7
 International Islamic University Chittagong (IIUC)
Department of Economics & Banking
Mid Term Examination: Autumn-2020
Program: BSS (Honours)

Course Code: INSU-4801 Course Title: Islamic Banking & Takaful

Time: 03 Hours Full Marks: 20
Each student must fulfill all the tasks according to the set assigned to them.

Set - A Marks Assigned Students

1. Islamic banks offer profit to their customers where (2+2+3=7)

conventional banks offer interest which is fixed in nature.
In spite of this Islamic banks allow the customer to share
profit and loss. On Savings Accounts they are not obliged
to offer any reward because the amount of the savings is
guaranteed and the holders of these accounts are not liable
for any losses that the bank incurs. This account,
therefore, can attract only those customers who have
money to save but do not want to take a risk and also are
not keen to earn profits on their savings. Though the
investment account, has the attraction of getting a higher
rate of return than the current rate of interest this account
will attract only those people who have the money to save,
want to earn money and are willing to take a risk.
a) Based on above statement how you will differ the
Islamic banking system with conventional banking
system?
b) In the given situation above determine what kinds of
problems involved there when Islamic banks mobilize
deposit? (No calculation is needed)
c) Determine how the problems can be solved. Are there
any roles of central bank to solve the problems? How?
2. Islamic banks have to face key challenges in order to (2+2+3=7)
compete with conventional banks practices very well.
These indicate that Islamic banks need to put up with the
strategies and techniques in managing risks as well in
terms of uncertain future events. Failure of a borrower to
repay a financing, fraud, incomplete security
documentations, non-compliances with Shariah law and
principles and other events that may result in a loss to the
bank.
a) What are the major risks Islamic banks may face?
Give some examples from Bangladesh.
b) How a uniform supervisory and regulatory framework
 can help in managing risks of Islamic banks?
c) Set out how you will assess the risks of Islamic banks
and how you will manage these?
3. Make a report on issues that make Islamic banking 6
controversial in Bangladesh.
 Set B

Assignment

International Islamic University Chittagong

Department of Economics & Banking
Autumn-2020
Program: BSS (Hons.) in Economics & Banking
Course: Econometric Methods and Applications (ECON-4810)

Instruction: Students bearing even ID will answer set A, and students bearing odd ID
will answer set B

Marks- 20 Time- 1 Hour

1. a) What is the necessity of studying of multiple regression model? Why don’t 2

you confine yourself to simple regression alone?
b) Construct a multiple regression model with ‘K-1’ number of explanatory 4
variables. What are the parameters of the model? Interpret the meanings
of intercept parameter and slope parameters of the model.
c) A researcher has regressed sales revenue (S) on price (P) and 4
advertisement (A). Using 80 observations, she obtained sum of squared
error (SSE) equal to 2025. Compute standard error of regression.

2. a) Consider the regression model y  1   2 x2  3 x3   4 x4  e 3

How will you test the significance of the variable x2? What do you mean by the
test of overall significance?
b) What are the merits of restricted least squares (RLS) estimators over OLS 2
estimators?
c) Is multicollinearity always a problem? Prove that perfect multicollinearity 5
invalidates ordinary least squares approach.
 Set- B
International Islamic University Chittagong
Department of Economics & Banking
Program: BSS (Honors)
Autumn- 2020 Online Final Assignment
Course: Econometric Methods and Applications (ECON-4801)
Full Marks- 30 Time- 5 hrs

(Answer all the questions below)

1. a) How is dummy variable different from normal explanatory variable? What is the
necessity of incorporating dummy variable in a regression model? 2
b) Present an example of dummy variable trap. 2
c) Using 4733 observations, WAGE has been regressed on a CONSTANT, 6
EDUCATION and SOUTH, where SOUTH=1 means the employee is from south
part of the country and SOUTH=0 means from north part. Regression output is
stated below.
Dependent Variable: WAGE
Method: Least Squares
Sample: 1 4733
Included observations: 4733

Variable Coefficient Std. Error t-Statistic Prob.

C -4.887948 0.470625 -10.38608 0.0000

EDUC 1.150508 0.034429 33.41641 0.0000
SOUTH -0.738793 0.175319 -4.213998 0.0000

R-squared 0.195457 Mean dependent var 10.18720

Adjusted R-squared 0.195117 S.D. dependent var 6.213761
S.E. of regression 5.574691 Akaike info criterion 6.274985
Sum squared resid 146995.1 Schwarz criterion 6.279081
Log likelihood -14846.75 Hannan-Quinn criter. 6.276424
F-statistic 574.5588 Durbin-Watson stat 0.363969
Prob(F-statistic) 0.000000

i) Write out the estimated wage equation for North region.

ii) What is the estimated wage of an employee of South part having 16 years of
education?
iii) Compute the wage difference between South and North employees both
having 10 years of education.

2. a) Error terms of two regression models have the following variance functions:
i) var( ei )  23
 ii) var( ei )  23xi2
Are the error terms of both models homoscedastic? Explain the logic. 2
b) Convert the following heteroskedastic errors into homoskedastic errors assuming
the simple regression model: yi     xi  ei 4
1 2
i) var( ei )   i2   2 xi
var( ei )   i2  7 xi
c) Discuss the consequences of heteroskedascity. 2
d) Variation of wages in rural area is found different from urban area. What type of
heteroskedasticity is this? How do you test heteroskedasticity in such event? 2

3. a) Is random regressor always a problem? Define endogeneity. 2

b) Construct a regression model assuming two explanatory variables x and x3 ;
2
where, x is endogenous but x3 is exogenous. How will you carry out
2
instrumental variable (IV) estimation in this case? 3
c) Distinguish between regression model and simultaneous equation model. 1
d) Consider the following national income model:

Y CI ....... .. (1)

C     Y  u ...( 2) ; Here, u is homoscedastic and uncorrelated error
1 2
term.
4
Show that the model suffers endogeneity problem.
 Set- A
International Islamic University Chittagong
Department of Economics & Banking
Program: BSS (Honors)
Autumn- 2020 Online Final Assignment
Course: Econometric Methods and Applications (ECON-4801)
Full Marks- 30 Time- 5 hrs

(Answer all the questions below)

1. a) Why do you need to incorporate dummy variable in a regression model? Is

dummy variable an explanatory variable? What is the distinguishing feature of
dummy variable? 4
b) Using 1000 observations, WAGE has been regressed on a CONSTANT,
EDUCATION and FEMALE. Regression output is stated below. 6

Dependent Variable: WAGE

Method: Least Squares
Sample: 1 1000
Included observations: 1000

Variable Coefficient Std. Error t-Statistic Prob.

C -3.505029 0.961422 -3.645671 0.0003

EDUC 1.126563 0.069744 16.15284 0.0000
FEMALE -2.526996 0.344133 -7.343090 0.0000

R-squared 0.243291 Mean dependent var 10.21302

Adjusted R-squared 0.241773 S.D. dependent var 6.246641
S.E. of regression 5.439340 Akaike info criterion 6.228188
Sum squared resid 29497.66 Schwarz criterion 6.242911
Log likelihood -3111.094 Hannan-Quinn criter. 6.233784
F-statistic 160.2735 Durbin-Watson stat 0.470282
Prob(F-statistic) 0.000000

i) Write out the estimated wage equation for reference group.

ii) What is the estimated wage of a female employee having 16 years of
education?
iii) Compute the wage difference between male and female both having 10 years
of education.

2. a) Error terms of two regression models have the following variance functions:
i) var( ei )   2
 ii) var( ei )   2 xi2
2
Are the error terms of both models homoscedastic? Explain the logic.
b) Convert the following heteroskedastic errors into homoscedastic errors assuming
the simple regression model: yi     xi  ei 4
1 2
i) var( ei )   i2  7 xi

ii) var( ei )   i2   2 xi

c) Are the following statements true? Why or why not? 4
i) Presence of heteroskedasticity might lead to wrong decision
regarding hypothesis testing under least squares approach.
ii) Heteroskedasticity does not alter the BLUE property of OLS
estimators.

3. The random regressor x2 in the regression model yi  1   2 x2   3 x3   4 x4  ei is

known to be endogenous.
a) What does this imply? 1
b) Can you estimate the model parameters by ordinary least squares approach?
Present your argument. 2
c) How will you carry out instrumental variable (IV) estimation in the above case?
Why is this called two-stage-least-squares method? 4
d) What properties must hold in order for a variable to be instrument? 1
e) Define the problem of underidentification. What is the consequence of this
problem? 2
 International Islamic University Chittagong (IIUC)
Department of Economics & Banking
Final Assignment: Autumn-2020
Program: BSS(Honours)

Course Code: INSU-4801 Course Title: Insurance and Takaful

Time: 05 Hours Full Marks: 30
Each student must fulfill all the tasks according to the set assigned to them.

Question Marks

1. Suppose that Delta Insurance Ltd. has appointed you as an executive of operation (10)
department. As an executive how you will prepare insurance contract for the clients?

2. In the present situation which one will be better for you in between Life insurance (10)
contract and Annuity? – Give your argument.

3. Suppose that you are a billionaire of Bangladesh and you want to keep yourself and (10)
your properties (Business and Personal Property) safe from risk. Discuss how you
will measure the risk involved in.
 Inte rnational Islamic Unive rsity Chittagong (IIUC)

Department of Economics & Banking

th
8 Semester , Final Examination: Autumn 2020
Program: B.S.S. (Honours)

Course Code: ECON 4803 Course Title: Applied Macroeconomics

Time: 5 Hours Full Marks: 30
Answer the following questions. All parts of a question must be answered sequentially. Figures in the right
margin indicate full marks.
1. (a) „Full flexibility- is the vital assumption responsible for the classical AS being vertical.‟ 3
Why did the Classicists make this assumption?
(b) Write the Neutrality of Demand-Side Stabilization in a Classical AS Economy. 3

(c) Assume current GDP is growing at a sluggish rate. The central bank is under pressure to 4
increase M and reduce interest rates and to “do something” to increase GDP growth.
Using an ISLM–ADAS with a classical AS curve, analyze the effects of this monetary
stimulus.

2. (a) It looks as if the vertical portion of the K-AS curve is identical to the vertical Classical AS 4
curve. Are they essentially the same curves?
(b) Assume confidence has crashed in this economy and the central bank is now under 6
pressure to jump-start the economy by increasing M and lowering interest rates. But
despite this, confidence remains unmoved. The situation is analogous to the liquidity trap.
Using the graph explain the situation.

3. (a) The “old,” or “traditional,” economy is loosely interpreted to be the Keynesian model, 5
while the New Economy is seen as the most recent iteration of the technology-driven
version of the supply-side, rational expectations, vertical AS model. The two paradigms
clearly have very strong policy implications that are fundamentally polar extremes of each
other. Explain
(b) Discuss the statement “The Keynesians claim that there is nothing “new” about the 5
economy, but that, once again, the confusion may have been shown by the identification
problem”.
 International Islamic University Chittagong (IIUC)

Department of Economics & Banking

th
8 Semester , Mid-term Examination: Autumn 2020
Program: B.S.S. (Honours)

Course Code: ECON 4803 Course Title: Applied Macroeconomics

Time: 6 Hours Full Marks: 20
Answer the following questions. All parts of a question must be answered sequentially. Figures in the
right margin indicate full marks.
1. (a) Discuss the Steady state equilibrium of the Solow neoclassical growth model. 4
(b) What happens if we increase savings in Solow Model? 3

2. (a) Given Solow production function 4

y= f(k)=k1/2
Let’s assume s=.4, δ=.06, and k=3.
Find steady state equilibrium capital stock and output.

(b) How does Endogenous growth model overcome the limitation of Neoclassical growth model? 3

3. (a) Briefly explain the origin of macroeconomic thoughts. 3

(b) Explain the equilibrium of the economy using IS-LM framework. 3