Question

* H Consider the following data on average mortgage rate (R) and the number of Housing Starts (H) in a community for a period of 5 years. H = 678,6-64.4R YR 8.5 7.8 7.6 7.5 8.0 115 111 185 201 206 (a)Write a regression model that relates both variables in both the "general" and "specific" forms. Briefly explain why the" specific" form is generally preferred in evaluating the relationship described by the data. (b)What is your expectation concerning the relationship between both variables? Explain the basis for your expectation. (c) Estimate the parameters of the model and write the results in standard form. Are the results consistent with your expectation? Explain. (d)Interpret the estimated results. (e)Suppose you expect the mortgage rate to fall to 7.4 in the next period, what would you expect the housing starts to be?

Please answer it with solutions not with excel

Answer 1

Given that SUMMERy oυτου Regression statistics Mulhple R 0.55259 030535 Adjusted R 0.07380 standard E8800 45.09702 observations Squre ANOVA df SS MS significa -nce F 0:334) Regression 1.3187 Residual 1.0000 3.0000 4.0000 2681.9771 2681.9771 6101.2229 2033.7410 8783.2000 Total p-value Lower any 951 uppert 957 Intercept coefficients standard t stat ESTOY 678.56 448.88 1:51 -65.35 56.91 1-1.15 0.23 -749.99 2101.11 0.33 -246.45 115-75

General form is y-atbx, where a is a constant b" is coefficient, "X"is the variable Here H = 678-65.35R1 -> The specific form would help us to understand the direchon of relakon ship whether the variably' are directly on sniersely related 6 so, here Hooying starts and mortage sale are inversely gelated as the value of the coefficient is negative © the parameter of the model is the coefficient of R, which is 65.35. ... H : 678 - 65.358 => No, oy the pvalue of the coefficient is greater than 0.05 hence the coefficient is not significant is rod and R-s2wre is 0.5525 meary only 55-75. percent of the variation is being captured by the model, the model is not significant. @ for a one percend variation in R, the H change by 65-35 milica © H = 678 – 65.35*7*4= 144.417