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
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
(b) Suppose that we have the following table of results:
Model (2) (3)
Intercept ? ?
D ? (18:099
C ? ??(10:190
x1 ? ( 0:028
x2 ? (0:163
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
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
I have a few econometric that require the use of R to generate the answer

advantages and disadvantages

hypothetical data on consumption expenditure ($) and income ($) is given in the table x Y 80 55 100 65 85 70 110 80 120 79 115 84

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

The equilibrium conditions for three related markets are given by:  (a)Write this system of equations in matrix notation of the form  Ax = B.  (b)  Find the determinant

Suppose time-series data has been generated according to the following process: where t is independent white noise. Our main interest is consistent estimation of Φ from r

what is the mathematical origin of durbin watson test for autocorrelation

cost benefit decision invest in college undergraduate 5 years

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