G. Menges developed the following econometric model for the West German economy: where Y = national income

Question:

G. Menges developed the following econometric model for the West German economy:

Y; = Bo + Bi Y,-1 + B2l. + u1: I, = B3 + B4Y, + ßs Q; + uz C; = B6 + B7 Y, + B3C;_1 + B9 P; + u3t Q, = B10 + B1Q,-1+ B1

where Y = national income

I = net capital formation

C = personal consumption

Q = profits

P = cost of living index

R = industrial productivity

t = time

u = stochastic disturbances

a. Which of the variables would you regard as endogenous and which as exogenous?

b. What is the reason behind including the variable P in the consumption function?

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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 03:59 AM

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G. Menges developed the following econometric model for the West German economy: where Y = national income

Question:

Y; = Bo + Bi Y,-1 + B2l. + u1: I, = B3 + B4Y, + ßs Q; + uz C; = B6 + B7 Y, + B3C;_1 + B9 P; + u3t Q, = B10 + B1Q,-1+ B12 R, + u4t

Step by Step Answer:

a The endogenous variables are Y C Q and I ...View the full answer

Basic Econometrics

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