1. Continuing with the model we used in problem 4 of Homework 4, i.e. the regression of real consumption (C) on real disposable income (DI), use the CORC procedure to correct the model for the presence of first-order serial correlation. [List the values of rho at each step, and include the final estimates].

2. Problem 8.3 on page 253.

3. Problem 8.4 on page 253.

4. What are the three requirements for a good instrumental variable?

5. Problem 8.10 on page 268 (skip the Hausman-Wu test). Here is the data set. [Note: The variables are EARNINGS=earnings (be sure to take the log), S=years schooling, EXPER=work experience, ASVABC=composite standardized test score, SM=years mother in school, SF=years father in school, SIBLINGS=number of siblings, and LIBRARY=member of family had library card when respondent was 14.] There are eight data series and 540 observations. Also, the name of the variable EXP has been changed to EXPER since EXP is an illegal name.

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