Estimate classical linear regression model, Microeconomics

The following model shows the consumption function given:

Ct = ADtβ2

Where A and β2 are unknown constants and D is disposable income.
(a) Show how by taking logarithms of the above equation, a linear equation may be obtained.

(b) interpret β.  The estimated model is given by:

  log Ct = 55.78 + 0.764 log Dt 

R2 = 0.89, values in brackets represent t-ratios.

(c ) Interpret the above results

(d) What the reasons behind the existence of multicollinearity and comment on the measures that can be used to deal with such a problem?

(e) What are the assumptions underlying the Classical Linear Regression Model?

Posted Date: 10/23/2013 5:38:13 AM | Location : United States







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