Suppose that we modify model (7.13) as follows: Yt = B1 + B2Xt + B3Time + B4Time2
Question:
Yt = B1 + B2Xt + B3Time + B4Time2 + ut
a. Estimate this model.
b. If the Year2in this model turns out to be statistically significant, what can you say about regression (7.13)?
c. Is there a specification error involved here? If so, of what type? What are the consequences of this specification error?
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aThe EViews results are as follows Dependent Variable Y Sample 1968 198...View the full answer
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