Nonlinear specification and dummy variables, Econometrics

Suppose you have a model of capital investment by a U.S. rm. Imagine that yt, x1t
and x2t are annual measures of investment, lagged pro t, and lagged capital stock,
all in real dollars. The sample data contains the years 1935-1954. The model can be
written as
yt = 0 + 1x1t + 2x2t +
Dt + "t ; (1)
where Dt is the dummy variable allowing to distinguish between war and non-war
years:
Dt =
{
1 if year=1939,...,1945
0 otherwise
:
Let us de ne a second dummy variable
Ct = 1 ?? Dt
and suppose that in fact we did not run the model (1), but another model (refer to
it as model (2)), where we included both dummies Dt and Ct.
(a) Is there something we should exclude from the model (2) if we want it to be
estimable?
(b) Suppose that we have the following table of results:
Model (2) (3)
Intercept ? ?
D ? (18:099
11:26)
C ? ??(10:190
11:72)
x1 ? ( 0:028
0:0053)
x2 ? (0:163
0:012)
Can you replace the \?" signs in the table? You can use the information that
the covariance matrix of parameters estimate in model (3) is
D C x1 x2
D 126.8591 114.424 -0.0529091 -0.0290572
C 137.3539 -0.052448 -0.0578449
x1 0.00002845202 -0.0000036976
x2 0.0001380281
2
Posted Date: 11/16/2012 5:45:03 PM | Location : Czech Republic







Related Discussions:- Nonlinear specification and dummy variables, Assignment Help, Ask Question on Nonlinear specification and dummy variables, Get Answer, Expert's Help, Nonlinear specification and dummy variables Discussions

Write discussion on Nonlinear specification and dummy variables
Your posts are moderated
Related Questions
You are considering a new line of consumer products. You expect revenues of $14 million in each of the next ten years, while expenses are half of revenues (all cash flows are assum

How Has Quantitative Analysis Changed The Current Scenario In The Management World Today?

i) Briefly distinguish between the Cournot duopoly model and that of Stackelberg.     ii) Suppose the  inverse  market demand curve for  a telecommunications equipment is P = 10

if there is no autocorrelation what will be done

Question 1: Explain the main drivers of globalisation and ascertain whether they have helped to reduce the gap between the rich and the poor countries. Question 2: Disc

what are the test for heteroscedasticity?


Choose Y and X variables to model on the Household and the Environment Survey 2006. Using Ox software to write a program to do estimation, and then write a report based on the an

if there is multicollinearity so why we can not estimate the value of parameters?

Given the demand function Qd = 650-5P-P2 where P=10 Find out the price elasticity of demand.