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Week3Notes - 1 ECON3300/7360 A PPLIED E CONOMETRICS Week 3...

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Unformatted text preview: 1 ECON3300/7360 A PPLIED E CONOMETRICS Week 3 Lecture Outline 1. Testing Economic Theories in Model - Pg.197, 166-167, 196, 194-195 of Mukarjee Text 2 Testing Economic Theories in Model Example 1 Demand for manufactured goods in India (Model 1) M = β 1 + β 2 Y + β 3 P f + β 4 P m + ε M- Per capita expenditure on manufactured consumer goods at constant 1970 prices Y - Disposable income per capita in current prices P f- Price index of cereals and cereal substitutes (1970 = 100) P m- Price index of manufactured consumer goods (1970 = 100) Consider the following in the above model 1. Income Distribution Effects 2. Money Illusion 3. Unitary Income Elasticity Example 1 KRISHNAJ Data Set (Model 1) M = β 1 + β 2 Y + β 3 P f + β 4 P m + ε Ordinary Least Squares Estimation *************************************************************************** Dependent variable is M 21 observations used for estimation from 1960 to 1980 *************************************************************************** Regressor Coefficient Standard Error T-Ratio[Prob] CONST 77.8487 6.7449 11.5419[.000] Y .065704 .026039 2.5234[.022] PF -.032527 .067026 -.48529[.634] PM -.20260 .16811 -1.2051[.245] *************************************************************************** R-Squared .91809 R-Bar-Squared .90363 S.E. of Regression 4.3339 F-stat. F( 3, 17)63.5114[.000] Mean of Dependent Variable 96.5000 S.D. of Dependent Variable 13.9609 Residual Sum of Squares 319.3115 Equation Log-likelihood -58.3750 Akaike Info. Criterion -62.3750 Schwarz Bayesian Criterion -64.4640 DW-statistic 1.1988 *************************************************************************** Diagnostic Tests *************************************************************************** * Test Statistics * LM Version * F Version *************************************************************************** * * * * A:Serial Correlation*CHSQ( 1)= 1.8935[.169]*F( 1, 16)=1.5856[.226] * * * * B:Functional Form *CHSQ( 1)= 13.5954[.000]*F( 1, 16)= 29.3773[.000] * * * * C:Normality *CHSQ( 2)= .27721[.871]* Not applicable * * * * D:Heteroscedasticity*CHSQ( 1)= 6.9258[.008]*F( 1, 19)=9.3497[.006] *************************************************************************** A:Lagrange multiplier test of residual serial correlation B:Ramsey's RESET test using the square of the fitted values C:Based on a test of skewness and kurtosis of residuals D:Based on the regression of squared residuals on squared fitted values 3 1) Income Distribution Effects (Model 2) M = β 1 + β 2 Y + β 3 P f + β 4 P m + β 5 Y 2 Ordinary Least Squares Estimation...
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Week3Notes - 1 ECON3300/7360 A PPLIED E CONOMETRICS Week 3...

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