What can be done to improve the estimation

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Reference no: EM131028657

A student has submitted her final dissertation in which she has estimated the following model using Zambian data:

Dln Const= B0+ B1Dln GDPt+ B2Dln CPIt+ B3DRt+ et

WhereDis the first difference operator,

Consis private consumption

GDP is gross domestic product,

CPI is consumer price index,

R is the three-month Treasury bill rate.

The sample is: 1969 (2) to 1994 (1)

Variable

Coefficient

Std.Error

t-value

HCSE

Constant

0.01692

0.00338

5.001

0.004597

Dln GDPt

0.36086

0.09173

3.934

0.093796

Dln CPIt

0.25917

0.16066

1.613

0.241880

DRt

0.00131

0.00103

1.269

0.001131

R2= 0.174366

F(3,96) = 6.7581 [0.0003]
DW = 2.35
RSS = 0.02298197499 for 4 variables and 100 observations
AR 1- 2 F( 2, 94) = 1.8497 [0.1630]
ARCH 4 F( 4, 88) = 2.6102 [0.0408] *
Normality X2(2)= 4.4048 [0.1105]
RESET F( 1, 95) = 0.94744 [0.3328]

a) Identify the problems in the estimated model.

b) What can be done to improve the estimation?

Reference no: EM131028657

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