INTRODUCTION TO ECONOMETRICS II ECO 306 NOUN 133 1.) Simple macroeconomic model consists of a consumption function and an income identity where
C is
aggregate consumption,
I isaggregate investment,
Y is aggregate income, and
u is a disturbance term.
On the assumption that I is exogenous, derive the reduced form equations for
C and
Y.
2.)
From the model above, demonstrate that OLS would yield inconsistent results if used to fit the consumption function, and investigate the direction of the bias in the slope coefficient.
5.1.7.0 REFERENCES FURTHER READING Maddala, GS, &Lahiri, K. (1992).
Introduction to econometrics (Vol. 2). New York.
Dougherty, C. (2007).
Introduction to econometrics. Oxford University Press, USA
