The demand for cable. The following table gives data used by a telephone cable manufacturer to predict

Question:

The demand for cable. The following table gives data used by a telephone cable manufacturer to predict sales to a major customer for the period 1968€“1983.

The variables in the table are defined as follows:

Y = annual sales in MPF, million paired feet

X₂ = gross national product (GNP), $, billions

X₃ = housing starts, thousands of units

X₄ = unemployment rate, %

X₅ = prime rate lagged 6 months

X₆ = Customer line gains, %

X4, Хв Хз, Housing Xs, Y, Annual X2, GNP Unemployment, Prime Rate Customer Line Sales (MPF) Year Starts Lag, 6 mos.

You are to consider the following model:

Y_i = Î²₁ + Î²₂X_2t + Î²₃X_3t + Î²₄X_4t + Î²₅X_5t + Î²₆X_6t + u_t

a. Estimate the preceding regression.

b. What are the expected signs of the coefficients of this model?

c. Are the empirical results in accordance with prior expectations?

d. Are the estimated partial regression coefficients individually statistically significant at the 5 percent level of significance?

e. Suppose you first regress Y on X₂, X₃, and X₄ only and then decide to add the variables X₅ and X₆. How would you find out if it is worth adding the variables X₅ and X₆? Which test do you use? Show the necessary calculations.