In studying the farm demand for tractors, Griliches used the following model where T desired stock of tractors X 1 relative price of tractors X 2 interest rate Using the stock adjustment model, he obtained the following results for the period 19211957 where the figures in the parentheses are the es...

a It is 1 00864 0136 b The shortrun price elasticity is 0218 and the longrun ...

In studying the farm demand for tractors, Griliches used the following model: where T* = desired stock

Question:

In studying the farm demand for tractors, Griliches used the following model:

where T* = desired stock of tractors

X₁ = relative price of tractors

X₂ = interest rate

Using the stock adjustment model, he obtained the following results for the period 1921€“1957:

where the figures in the parentheses are the estimated standard errors.

a. What is the estimated coefficient of adjustment?

b. What are the short- and long-run price elasticities?

c. What are the corresponding interest elasticities?

d. What are the reasons for high or low rate of adjustment in the present model?

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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 04:17 AM

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In studying the farm demand for tractors, Griliches used the following model: where T* = desired stock

Question:

T; = aX_x% 1,1-142,1-1 2,1-1 log T, = constant – 0.218 log X1,-1- 0.855 log X2,-1+ 0.864 log T,-1 (0.170) %3D (0.035) (0.051) R? = 0.987

Step by Step Answer:

a It is 1 00864 0136 b The shortrun price elasticity is 0218 and the longrun ...View the full answer

Basic Econometrics

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