26 - Chapter 2, Exercise Solutions, Principles of...

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Chapter 2, Exercise Solutions, Principles of Econometrics, 3e 26 Exercise 2.13 (continued) (d) Refer to Figure xr2.13(e). (e) The estimated model is n 167.548 13.034 SOLD FIXED_RATE =− The coefficient 13.034 suggests that a 1% increase in the 30 year fixed interest rate for home loans is associated with a decrease of around 13,034 houses sold. The intercept suggests that when the 30 year fixed interest rate is 0%, 167,548 houses will be sold over a period of 1 month. Caution should be exercise with this interpretation, however, because it is beyond the range of the data. 20 40 60 80 100 120 140 5 6 7 8 9 10 11 SOLD FIXED_RATE Figure xr2.13(e) Fitted line and observations for houses sold against fixed rate Figure xr2.13(e) shows us where the fitted line lies amongst the data points. From this
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