Consider the error correction model in equation (18.37). Show that if you add another lag of the

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Consider the error correction model in equation (18.37). Show that if you add another lag of the error correction term, yt-2 - βxt- 2, the equation suffers from perfect collinearity.

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Introductory Econometrics A Modern Approach

ISBN: 978-0324660548

4th edition

Authors: Jeffrey M. Wooldridge

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Question Posted: Apr 21, 2016 05:03 AM

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Consider the error correction model in equation (18.37). Show that if you add another lag of the

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Following the hint we show that yr2xr2 can be written ...View the full answer

Introductory Econometrics A Modern Approach

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