Question

Empirical Exercises 10.26. Klein and Goldberger attempted to fit the following regression model to the U.S. economy: 343i where Y= consumption, X2 = wage income, X3-nonwage, nonfarm income, and X4farm income. But since X2, X3, and X4 are expected to be highly collinear, they obtained estimates of and A from cross-sectional analysis as follows: Year 1936 62.8 43.41 17.10 3.96 1937 65.0 46.44 18.65 5.48 1938 63.9 44.35 17.09 4.37 1939 67.5 47.82 19.28 4.5 1940 71.3 51.02 23.24 4.88 1941 76.6 58.71 28.11 6.37 1945* 86.3 87.69 30.29 8.96 Year 1946 95.776.73 28.26 9.76 194798.375.91 27.91 9.31 1948 100.3 77.62 32.30 9.85 1949 103.2 78.01 31.39 7.21 1950 108.9 83.57 35.61 7.39 1951 108.5 90.59 37.58 7.98 1952 111.4 95.47 35.17 7.42 2 The data for the war years 1 1942-1944 are missing. The data for other years are billions of 1939 dollars. Bs-0.75f 2 and β4-0.625A. Using these estimates, they reformulated their consumption function as follows: where Zi X2i +0.75X3i +0.625 Xi a. Fit the modified model to the data in Table 10.12 and obtain estimates of b.How would you interpret the variable Z? to β4

Answer 1

Given data , 625 tVen у, -S·キß, СУ,, t o.as xại + o.625Xa.) t 3i id mode 二 0.906 0-532 . 0.5.3 2 (6,34う(๑.066) 0.418506. euron (se): .8taudod 二