Consider the Koyck (or, for that matter, the adaptive expectations) model given in Eq. (17.4.7), namely, Suppose

Question:

Consider the Koyck (or, for that matter, the adaptive expectations) model given in Eq. (17.4.7), namely,

Suppose in the original model u_t follows the first-order autoregressive scheme u_t ˆ’ Ïu_1ˆ’t = Îµ_t, where Ï is the coefficient of autocorrelation and where Îµ_t satisfies all the classical OLS assumptions.

a. If Ï = Î», can the Koyck model be estimated by OLS?

b. Will the estimates thus obtained be unbiased? Consistent? Why or why not?

c. How reasonable is it to assume that Ï = Î»?

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Basic Econometrics

ISBN: 978-0073375779

5th edition

Authors: Damodar N. Gujrati, Dawn C. Porter

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Question Posted: May 29, 2018 04:18 AM

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Consider the Koyck (or, for that matter, the adaptive expectations) model given in Eq. (17.4.7), namely, Suppose

Question:

Y-α(1-λ) + β X +λY- + (1- λι-1)

Step by Step Answer:

a Yes in this case the Koyck model may be estimated with OLS b There will ...View the full answer

Basic Econometrics

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