Inflation, Interest Rate and Income Effects on Housing Price in the U.K.
This paper’s objective is to give you an introduction into conducting an empirical research and
presenting the results of that research in a professionally written paper. To carry out this
research, you will identify an economic relationship (or a demand equation) between variables
that are interesting to you. In your paper, you will describe this relationship and present a lucid
argument for the importance of a better understanding of this relationship. And then, collecting
appropriate data, you will empirically estimate this relationship along with all of the appropriate
goodness of fit tests and statistics. Finally, you will analyze and report the results of your
empirical estimation with particular emphasis on how these results are important and useful for a
manager of a business enterprise or an economic agent faced with a choice. Your final report
must contain the following sections:
INSTRUCTIONS : This final report should add more five pages on the progress report , not
including tables and diagrams (plots of your data, if you are including them).
a. Brief Introduction and Literature Review – Discuss and flesh out the motivation for the
economic relationship you are estimating in this paper. While you do not have to go
into lengthy discussions about the underlying economic theory, it should be
sufficiently detailed so the relationship you are estimating is made clear to the
reader. In this section, you should include a short discussion of the literature. While
it does not need to be exhaustive, pick three to five papers to frame your research
and place it in context.
b. Data Description – Give a brief discussion of the data and how/where they were
collected. At the minimum, you should note the time range of the data, scales of the
data (i.e., data in millions of dollars or thousands of tons, etc.), and any notable
events that may be applicable to your data set (such as change in corporate
ownership or natural disasters, etc.). Also, you should describe the institutional
setting of your data. E.g., you should discuss the business with an eye towards how
some unique industry practices might have an impact on the specific data that you
had collected. Also include a table of basic descriptive statistics for your data. Your
description of the data would surely be aided by carefully drawn charts of your data.
c. Regression Model and Results – Carefully develop your regression model. You must
support your model with a “story” of why the right hand side variables you include
are important and/or with the support of the relevant economic theory (including
your hypotheses). Report your regression results in an equation form (see the
textbook for how this is done) or a table form. Be sure to report all relevant
statistics: coefficient estimates, standard error, R2, various test statistics, etc.
d. Discussion and Diagnostic Tests – Carry out all appropriate “goodness of fit” tests and
briefly discuss the “fit” of your regression equation. Which form is the preferred:
linear or log-linear? Explain your conclusion. Finally, carefully describe what your
empirical results are telling you about your hypothesized economic relationship that
you had outlined in part a.
e. Conclusion – What does your regression tell you about the demand in the industry? What
more can be done in the future?