Question: a)Using appropriate notation, explain the Chow test for structural break. (30 marks) b)Given the true model is: where: = consumption expenditure, = disposable income, =

a)Using appropriate notation, explain the Chow test for structural break. (30 marks)

b)Given the true model is:

where: = consumption expenditure, = disposable income, = accumulated wealth. Suppose you mistakenly added an irrelevant variable () to the model. Discuss the possible consequences of such a misspecification. (30 marks)

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