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page LO Page view SECTION II (Each question has 60 marks; 60 marks in total) 11. According to existing housing-related literature, housing prices can be affected by the volume of mortgage credit ie. mortgage credit). The impact of mortgage credit on housing prices can be estimated by the following linear regression model: HPI = a + b Credit + uz (1) Where HPI, indicates housing prices; Credit, indicates mortgage credit; u, stands for the error term and it is assumed to follow a normal distribution with zero mean and constant variance, ie. u.~(0,82); a and are intercept and slope of the regression, respectively. The above model is estimated by using the ordinary least square (OLS) estimator. (3) The researcher tells you that the impact of mortgage credit on housing prices in the US, i.e. B, is equal to 3.1, and we know that the impact in the US should not be less than 3.1 according to previous theoretical discussions. You have re-estimated the above equation over 30 quarterly observations in the US. The estimated values of the intercept and its standard error are 3.213 and 0.0132, respectively. Test the argument of the researcher using a hypothesis testing at 5% significance level. Write down the null and alternative hypotheses. What do you conclude? Is the researcher's argument empirically verified? (15 marks) 41 According to the estimation results given in question (2), form and interpret a 95% and page LO Page view SECTION II (Each question has 60 marks; 60 marks in total) 11. According to existing housing-related literature, housing prices can be affected by the volume of mortgage credit ie. mortgage credit). The impact of mortgage credit on housing prices can be estimated by the following linear regression model: HPI = a + b Credit + uz (1) Where HPI, indicates housing prices; Credit, indicates mortgage credit; u, stands for the error term and it is assumed to follow a normal distribution with zero mean and constant variance, ie. u.~(0,82); a and are intercept and slope of the regression, respectively. The above model is estimated by using the ordinary least square (OLS) estimator. (3) The researcher tells you that the impact of mortgage credit on housing prices in the US, i.e. B, is equal to 3.1, and we know that the impact in the US should not be less than 3.1 according to previous theoretical discussions. You have re-estimated the above equation over 30 quarterly observations in the US. The estimated values of the intercept and its standard error are 3.213 and 0.0132, respectively. Test the argument of the researcher using a hypothesis testing at 5% significance level. Write down the null and alternative hypotheses. What do you conclude? Is the researcher's argument empirically verified? (15 marks) 41 According to the estimation results given in question (2), form and interpret a 95% and

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