14A_Nonlinear_handout

14A_Nonlinear_handout - Nonlinear models 73-261...

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Unformatted text preview: Nonlinear models 73-261 Econometrics October 4 Wooldridge 6.2 Updated Oct-04. changes highlighted with blue font p. 2 CMU / Y. Kryukov 73-261 1.4 Nonlinear functions Announcements Midterm scores are low for everybody Exams will not be distributed Solution is posted You can your exam during office hours Extra review session this Friday? No new GRETL material this week HW#3 will be distributed after class HW#4 is being graded HW#5 will be posted Wednesday p. 3 CMU / Y. Kryukov 73-261 1.4 Nonlinear functions Overview Up to now: linear model y = x Effect of change in x 1 does not depend on level of x 1 or any other x j Today: Non-linear models Logarithm, interpretation and effects Prediction and goodness-of-fit Power functions smiles & frowns Interactions of variables p. 4 CMU / Y. Kryukov 73-261 1.4 Nonlinear functions Reducing the model to a linear one Any software has linear regression, even Excel In olden days, computers could only handle linear models General nonlinear methods exist, but: No solution formula like in OLS Have to use numerical optimization Which can (and occasionally does) fail Reducing model to OLS is very common Linear in coefficients, not variables p. 5 CMU / Y. Kryukov 73-261 1.4 Nonlinear functions1....
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This note was uploaded on 01/21/2011 for the course ECON 73-261 taught by Professor Kyrkv during the Fall '09 term at Carnegie Mellon.

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14A_Nonlinear_handout - Nonlinear models 73-261...

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