Question

First question:
The model: Y4 = Bo + B2C+ + ut, t = 1,2,.....n, is an example of a(n): a) Autoregressive conditional heteroscedasticity model. b) static model. c) finite distributed lag model. d) infinite distributed lag model.
Second question:

Answer 1

QUESTION 1

This is a static model. That is because it contains no lagged terms of the dependent variable Y in the right hand side to be called an autoregressive model, and has no lagged terms of the independent variable C in the right hand side of the equation to be called a distributed lag model.

QUESTION 2

The error term becomes homoskedastic when a Weighted Least Squares transformation is used. It can be obtained in the following way -

1 Beer = Pot BiQne) AB, Price) + 83. (edu). + BAC Female) & ui * Ui = Bere-Bo-Bilane) - B2 (price) - Bg (Edu) - BA (Fernate) I Let wi= / 2962) L. Zwilli = zwi(Beer-Bo-Bi(ne) - P2 (Parice) - B3 (Edu) - BA (female)

The resulting error terms are homoskedastic.