Chapter+8 - Instruc ctor : H.H. Kim 1 Econo ometrics...

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Instruc Nonlin - E - B - T f Outline - N - N - N Genera Nonlin - A ctor : H.H. ear Regre Everything But the lin The multip functions e Nonlinear Nonlinear Nonlinear al Strateg ear Speci A general Kim ession Func g so far ha ear appro ple regres that are n r regressio r functions r functions y fication l formula ctions as been lin oximation sion frame nonlinear i n function s of one va s of two va 1 near in the is not alw ework ca in one or m ns gener ariable ariables: in e X s ays a goo n be exte more X . ral comme nteraction od one ended to ents ns Econo handle re ometrics egression
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Fall 20 - T - T 11 The hypot The effect thesis test t on Y of a and the c a change 2 confidenc in X1 ce interval R Rutgers U niversity
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Instructor : H.H. Kim Econometrics 3 - Confidence Interval and Standard Errors of estimated effects - Interpreting coefficients - A general approach to nonlinear model 1. Identify a possible nonlinear relationship 2. Specify a nonlinear function and estimate its parameter by OLS 3. Determine whether the nonlinear model improves upon a linear model. 4. Plot the estimated nonlinear regression function. 5. Estimate the effect on Y of a change in X. Nonlinear Functions of a Single Regressor - Two Approach of Nonlinear Function 1. Polynomials in X - The population regression function is approximated by a quadratic, cubic, or higher-degree polynomial 2. Logarithmic transformations - Y and/or X is transformed by taking its logarithm - This gives a percentages interpretation that makes sense in many applications
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Fall 2011 Rutgers University 4 Polynomials - Which degrees polynomials should I use? o How many powers of X should be included in. - Sequential Hypothesis Testing 1. Pick a maximum value of r and estimate the polynomial regression for that r. 2.
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Chapter+8 - Instruc ctor : H.H. Kim 1 Econo ometrics...

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