2. Consider the following distributed lag model: 4 Y = a(1-X) +3X + XY_ + (u,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
2. Consider the following distributed lag model: 4 Y = a(1-X) +3X + XY_₁ + (u, — \u₁_₁), - t-1 0 ≤X ≤ 1, Suppose in the original model u~ AR(1): u = pu + e, where p is autocorrelation coefficient and e, is white noise. (a) If λ = p, can the above model be estimated by OLS? Why and why not? (b) Will the estimates thus obtained be unbiased? Consistent? Why and why not? (c) How reasonable is it to assume that λ = p? 2. Consider the following distributed lag model: 4 Y = a(1-X) +3X + XY_₁ + (u, — \u₁_₁), - t-1 0 ≤X ≤ 1, Suppose in the original model u~ AR(1): u = pu + e, where p is autocorrelation coefficient and e, is white noise. (a) If λ = p, can the above model be estimated by OLS? Why and why not? (b) Will the estimates thus obtained be unbiased? Consistent? Why and why not? (c) How reasonable is it to assume that λ = p?
Expert Answer:
Answer rating: 100% (QA)
ANSWER a If the model cannot be estimated by ordinary least squares OLS because of the presence of endogeneity In the given model Yt depends on Yt1 wh... View the full answer
Related Book For
Quantitative Investment Analysis
ISBN: 978-1119104223
3rd edition
Authors: Richard A. DeFusco, Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle
Posted Date:
Students also viewed these economics questions
-
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 Ïu 1t...
-
can someone solve this Modern workstations typically have memory systems that incorporate two or three levels of caching. Explain why they are designed like this. [4 marks] In order to investigate...
-
United Research Associates (URA) had received a contract to produce two units of a new cruise missile guidance control. The first unit took 4,000 hours to complete and cost $ 30,000 in materials and...
-
In FIGURE 5-37 we show the Earth, Moon, and Sun (not to scale) in their relative positions at the time when the Moon is in its third-quarter phase. Though few people realize it, the force exerted on...
-
For the circuit shown in Fig. 2.116, find the equivalent resistance. All resistors are 1Ω. Figure 2.116 For Prob. 2.52. Req
-
Describe the trial process.
-
Hartwell Drug Company produces a supplement to improve bone density. Conversion costs are added evenly throughout the production process. The following information is available for March: Required a....
-
On September 1 , 2 0 2 7 , Betty DeRose, Inc. received $ 5 4 , 0 0 0 cash from a customer as payment for services that will be performed over the next 3 0 months. On May 3 1 , 2 0 2 8 , Betty DeRose,...
-
A rod on a ball and socket joint is attached to cables A and B as in Figure. (a) If a 50-N force is exerted on the massless rod at G, what is the tensile force at cables A and B? (b) Solve for the...
-
ten moles initial Pressure Pressure at reversibly a of an ideal gas at the of one one atmospheric were expanded Pressure 0L under final isothermal conditions. of oil atmospheric calculate the work...
-
Determine the effective annual yield for each investment. Then select the better investment. 3.98% compounded semiannually; 3.97% compounded monthly XEE Select the correct choice below and fill in...
-
Exhibit 19B.1 Present Value of $1* Periods 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 40% 1 0.980 0.962 0.943 2 0.961 0.925 0.890 3 0.942 0.889 0.840 0.926 0.857 0.794 4 0.924 0.855...
-
To convert a score that is given in inches to a score that is given in centimeters, we multiply by 2.54. The formula is CM = 2.54*INCHES Is that an example of a linear transformation? Select one: a....
-
10 A rock of mass is thrown horizontally off a building from a height h, as shown above. The speed of the rock as it leaves the thrower's hand at the edge of the building is vo. What is the kinetic...
-
The volume of a sample of gas is measured as 3778.3 cm. Convert the volume to cubic meters. 3778.3 cm = 3 m
-
Warren Buffett has given approval for Berkshire Hathaway (BH) to enter into an arrangement with Lehman Brothers (LB) to lend $900 million to Williams, for a term of one year. Its well known to these...
-
A regular deposit of $100 is made at the beginning of each year for 20 years. Simple interest is calculated at i% per year for the 20 years. At the end of the 20-year period, the total interest in...
-
Your firm intends to select 4 of 10 vice presidents for the investment committee. How many different groups of four are possible?
-
You believe there is a relationship between book-to-market ratios and subsequent returns. The output from a cross-sectional regression and a graph of the actual and predicted relationship between the...
-
Suppose we take a random sample of 30 companies in an industry with 200 companies. We calculate the sample mean of the ratio of cash flow to total debt for the prior year. We find that this ratio is...
-
(a) The following trial balance was extracted from the books of M. Jackson on 30 April 2017. From it, and the note below it, prepare his statement of profit or loss for the year ending 30 April 2017,...
-
On 1 April 2013 a business purchased a machine costing 112,000. The machine can be used for a total of 20,000 hours over an estimated life of 48 months. At the end of that time the machine is...
-
On 1 January 2015 a business purchased a laser printer costing 1,800. The printer has an estimated life of four years after which it will have no residual value. It is expected that the output from...
Study smarter with the SolutionInn App