Homework

DATA

The graphs including 1 explanatory variable and the dependent variable Y

FIGURE 1: Scatter Diagrams – 3 explanatory variables are plotted against the US GDP

Employment

Real wage

CPI

model specification

From the data collected, we first examine the linear model with four explanatory variables including:

* Employment Abbreviation-E unit: million of employee

* Real wages Abbreviation RW unit:million of dollars

* CPI Abbreviation CPI unit:million of dollars

Functional model test

CV=S.E of regressionMean of dependent variable

The result from eview are as follow.

THE LINEAR MODEL

The linear model:

Y=β1 + β2X2 + β3X3 + … + βnXn

(When n is the number of explanatory variable)

Table 1:Eview result linear regression of GDP and the 3 regressiors:

Dependent Variable: GDP | | |

Method: Least Squares | | |

Date: 04/26/12 Time: 01:06 | | |

Sample: 1929 1970 | | |

Included observations: 42 | | |

| | | | |

| | | | |

Variable | Coefficient | Std. Error | t-Statistic | Prob.   |

| | | | |

| | | | |

E | 0.024782 | 0.008313 | 2.980999 | 0.0050 |

RW | 63.42272 | 6.281703 | 10.09642 | 0.0000 |

CPI | -1.700098 | 3.950606 | -0.430339 | 0.6694 |

C | -990.7010 | 388.5908 | -2.549471 | 0.0149 |

| | | | |

| | | | |

R-squared | 0.960787 |     Mean dependent var | 3647.900 |

Adjusted R-squared | 0.957691 |     S.D. dependent var | 1087.753 |

S.E. of regression | 223.7417 |     Akaike info criterion | 13.74925 |

Sum squared resid | 1902294. |     Schwarz criterion | 13.91475 |

Log likelihood | -284.7343 |     Hannan-Quinn criter. | 13.80991 |

F-statistic | 310.3534 |     Durbin-Watson stat | 0.486541 |

Prob(F-statistic) | 0.000000 | | | |

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| | | | |

CV= 223.7417/3647.90=0.0613

THE LOG-LOG MODEL

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The Log-log model:...