A researcher once attempted to estimate an asset demand equation that included the following three explanatory variables:
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A researcher once attempted to estimate an asset demand equation that included the following three explanatory variables: current wealth Wt, wealth in the previous quarter Wt-1, and the change in wealth ΔWt = Wt - Wt-1. What problem did this researcher encounter? What should have been done to solve this problem?
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Perfect multicollinearity each can b...View the full answer
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