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

Regression Analysis, #qu3. People educational achievement is affected, amon...

#qu3. People educational achievement is affected, among other factors, by the demographic characteristics of their households; the following multiple regression model was estimated

Maximising levels of capital, A perfectly competitive firm hires its machin...

A perfectly competitive firm hires its machines at a constant rental rate of r = 5 euros per unit and its workers at a constant wage rate of w = 4 euros per unit. It can also sell

Elasticity, compare the price elasticity of demand on two parallel demand c...

compare the price elasticity of demand on two parallel demand curves for a given price and for a given quantity

Crossection regression, what factors dertemine underemployment/overemployme...

what factors dertemine underemployment/overemployment

Procurement, You are a logistics consultant for a rapidly growing online re...

You are a logistics consultant for a rapidly growing online retail company. They plan to expand their operations to a new geographical region.Task: Develop a comprehensive logistic

Probability distribution function, Assume the following table gives the joi...

Assume the following table gives the joint PDF (probability distribution function, not Adobe document!!) of two discrete variables, x and Y. Vari

David the most interest, David has £5000 that he wishes to save for ...

David has £5000 that he wishes to save for six years. Bank A offers him an interest rate of 4% per annum compounded monthly. Bank B offers him an interest ra

Walrasion equilibrium.., # ?????? ..

# ?????? ..

Habib ullah vaseer, function its types

function its types

Homoscedasticity and heteroscedasticity, Probelm: (a) Differentiate bet...

Probelm: (a) Differentiate between homoscedasticity and heteroscedasticity. (b) Outline the reasons why the variances of disturbance term may vary. (c) Given the 3 observ

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