Nonlinear specification and dummy variables, Econometrics

Nonlinear specification and dummy variables, Econometrics

Assignment Help:

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 prot, 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 dene 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

Related Discussions:- Nonlinear specification and dummy variables

Maximum likelihood procedure, A brief summary of the procedure of maximum l...

A brief summary of the procedure of maximum likelihood.

Production function and general equilibrium, Production Functions, Labor Ma...

Production Functions, Labor Markets, and a Small Open Economy. In 2007, the Icelandic economy was in general equilibrium, the supply of labor was a positive function of the real

Goldfeld quandt test, explain the method with an example

explain the method with an example

Ec, economic system

economic system

Income elasticity, The following multiple regression results are part of a ...

The following multiple regression results are part of a study of the demand for chicken in the USA. Q Calculates the quantity of chicken purchased per annum. PC and PB are the pric

Determine partial derivatives of the demand function, Problem 1. Consider t...

Problem 1. Consider the demand function Q(p 1 , p 2 , y) = p 1 -2 p 2 y 3 , where Q is the demand for good 1, p 1 is the price of good 1, p 2 is the price of good 2 and y is t

Central problems of economics, #what is the central problems of economics

#what is the central problems of economics

Total product-average product and marginal product, Consider the following ...

Consider the following short run production function. Q 0 15 35 60 90 115 135 150 16

Firm''s marginal revenue function, A firm has the following inverse demand ...

A firm has the following inverse demand function: where Q is Quantity and P is Price (a) Find the firm's marginal revenue function. (b) Find the level of out

Level of interest rate, You have won a contest and are allowed to choose be...

You have won a contest and are allowed to choose between two prizes. One option is to receive $200 now and another $200 a year from now. The second option is $150 now and $255 a

Write Your Message!

Name

Email id

Message

Verfication Code

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd