Question: Use the data in Problem 12.8, but now consider the following models: In PCEt = A1 + A2In PDIt + ut In PCEt = B1

Use the data in Problem 12.8, but now consider the following models:
In PCEt = A1 + A2In PDIt + ut
In PCEt = B1 + B2In PDIt + B3 In PCEt-1 + vt
where In = the natural log.
a. Interpret these regressions.
b. What is the short- and long-run elasticity of PCE with respect to PDI?

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1 In CE t 03834 10346 PDI t t 1173 25797 r 2 0999 2 In CE t 0051... View full answer

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