Create a scatterplot of the explanatory variables

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Reference no: EM132445959

Please use excel to solve this question.

Year

Quarter

C

Y

L

1952

1

220.0

238.1

182.7

1952

2

222.7

240.9

183.0

1952

3

223.8

245.8

184.4

1952

4

230.2

248.8

187.0

1953

1

234.0

253.3

189.4

1953

2

236.2

256.1

192.2

1953

3

236.0

255.9

193.8

1953

4

234.1

255.9

194.8

1954

1

233.4

254.4

197.3

1954

2

236.4

254.8

197.0

1954

3

239.0

257.0

200.3

1954

4

243.2

260.9

204.2

1955

1

248.7

263.0

207.6

1955

2

253.7

271.5

209.4

1955

3

259.9

276.5

211.1

1955

4

261.8

281.4

213.2

1956

1

263.2

282.0

214.1

1956

2

263.7

286.2

216.5

1956

3

263.4

287.7

217.3

1956

4

266.9

291.0

217.3

1957

1

268.9

291.1

218.2

1957

2

270.4

294.6

218.5

1957

3

273.4

296.1

219.8

1957

4

272.1

293.3

219.5

1958

1

268.9

291.3

220.5

1958

2

270.9

292.6

222.7

1958

3

274.4

299.9

225.0

1958

4

278.7

302.1

229.4

1959

1

283.8

305.9

232.2

1959

2

289.7

312.5

235.2

1959

3

290.8

311.3

237.2

1959

4

292.8

313.2

237.7

1960

1

295.4

315.4

238.0

1960

2

299.5

320.3

238.4

1960

3

298.6

321.0

240.1

1960

4

299.6

320.1

243.3

1961

1

297.0

318.4

246.1

1961

2

301.6

324.8

250.0

The dataset contains information for consumption (C), income (Y), and liquid assets (L) for the period from the first quarter of 1952 to the second quarter of 1961. All figures are in billions of 1954 dollars. We are going to examine the multicollinearity existence in this dataset.

a) Create a scatterplot of the explanatory variables. Explain the relationship.

b) Calculate the correlation between the explanatory variables. What does it indicate?

c) Run a regression of consumption on income and liquid assets. Examine the adjusted R2 and the t-statistics of the coefficients. What can you conclude?

d) Calculate the variance inflation factors. What can you conclude?

e) Looking at your answers for parts b through d, what is your overall conclusion?

Reference no: EM132445959

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