Irish Scrappage Scheme Essay Example | Topics and Well Written Essays - 3750 words

Irish Scrappage Scheme - Essay ExampleRecall that the questions we are concerned with are (i) whether the scrappage aim has had a positive restore on the aggregate gross sales of cars in the domestic market and (ii) whether the invention of the scrappage scheme has created a substitution effect from G and C band vehicles to A and B bell ringer vehicles. The hypothesis and the basic setupIn order to empirically examine these questions, the easiest and simplest methodology adoptable is that of employ two different OLS infantile fixations for cases (i) and (ii) to test whether the introduction of the scheme lead to any signifi cigarett departures in the fourth dimension series observations of our subject variables. As mentioned earlier, our dependent variable for case (i) are the quarterly car sales over the sample period of 2003 to 2010. Incorporating an indicator variable for the period periods which were under the coverage of the scrappage scheme as an independent variable , one can conceive an OLS specification to see if the there was a significant impact of the dummy on the dependent variable. However, in order to obtain precise, valid estimates it is crucial to control for otherwise factors that may have influenced car sales during the sample period. To better understand the reasoning, consider the following regression (1) represents the dependent variable, denotes the constant, i.e., the intercept, denotes the dummy for the scrappage scheme, represents a vector of controls and is the stochastic disturbance or the error term . can be defined as And Thus, the coefficient signifies the impact of the scrappage scheme on the dependent variable . If we find is statistically significant from zero, the implication pull up stakes be that the scrappage scheme had an impact. The sign on the coefficient will indicate the path of the impact. Therefore, if the coefficient is found to be significant and positive, that will imply that the scrappage scheme led to an increase in the dependent variable . If on the other hand we find the coefficient to be negative, that will imply that the scrappage scheme led to a decline on the dependent variable. The coefficient vector includes the coefficients on the individual variables included as controls. The signs and significances of these coefficients will reveal the direction and importance of the control variables for the determination of the dependent variable. Therefore, for case (i), we can take the time series of car sales as our dependent variable