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

## Question:

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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Chapter #

**17**Section: Exercise Questions

Problem: 12

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