Introduction to Econometrics 3rd Edition by James Stock, James Stock

Exercise 1

On the text Web site http://www.pearsonhighered.com/sfock_watson/, you will find a data file Growth that contains data on average growth rates from 1960 through 1995 for 65 countries along with variables that are potentially related to growth. A detailed description is given in Growth_Description, also available on the Web site. In this exercise, you will investigate the relationship between growth and trade.
a. Construct a scatterplot of average annual growth rate ( Growth ) on the average trade share ( TradeShare ). Does there appear to be a relationship between the variables
b. One country, Malta, has a trade share much larger than the other countries. Find Malta on the scatterplot. Does Malta look like an outlier
c. Using all observations, run a regression of Growth on TradeShare. What is the estimated slope What is the estimated intercept Use the regression to predict the growth rate for a country with a trade share of 0.5 and with a trade share equal to 1.0.
d. Estimate the same regression excluding the data from Malta. Answer the same questions in c..
e. Where is Malta Why is the Malta trade share so large Should Malta be included or excluded from the analysis