EconometricsEconometricsSlide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25BRINNER1.pot EconometricsLecture 7BRINNER2.pot Econometrics0100020003000400050006000700080000100020003000400050006000700080000 100 200 300 400 500 600 700 800 900Consumer DurablesDisposable IncomeCorrelationCDYD 0.993222BRINNER3.pot Econometrics.02.04.06.08.10.12.14.02.04.06.08.10.12.14-.10 -.05 .00 .05 .10 .15 .20 .25 .30@PCHY(CD)@PCHY(YD)Arrow = equal growthCorrelation CD growthYD growth 0..190BRINNER4.pot -.04-.02.00.02.04.06.08.10-.04-.02.00.02.04.06.08.10-.15 -.10 -.05 .00 .05 .10 .15 .20 .25@PCHY(CD96C)@PCHY(YD96C)EconometricsArrow = equal growthCorrelation Real CD growthReal YD growth 0..628Arrow = 2.5 x growth for real CD vs real YDBRINNER5.pot Econometrics-.15-.10-.05.00.05.10.15.20.25-.15-.10-.05.00.05.10.15.20.251970 1975 1980 1985 1990 1995 2000@PCHY(CD96C) @PCHY(YD96C)BRINNER6.pot EconometricsD e r iv in g t h e O L S ( O r d in a r y L e a st S q u a r e s) e s t i m a te d c o e f fic ie n ts: (1 ) tttebXaY (2 ) XbaY ttteXXbYY )( (3 ) tttebxy - th e s u m o f th e e r ro r s is z e r o - a b a r ( i.e . X ) o v e r a v a ria b le s ig n ifie s t h e m e a n - s u b tra c t th e m e a n s ( 2 ) fr o m e a c h v a lu e (1 ) - r e n a m e t h e d e v ia tio n s fro m t h e m e a n w ith lo w e r c a s e le tte r s ( 3 ) tttbxye BRINNER7.pot EconometricsGoal: find the bˆ that minimizes the sum of the squared error terms, 2te. 22222222222ˆ02222ttttttttttttttttttttxxybxbxybexbxybyexbxbyyebxye Note that upper-case letters represent the variable and that lower-case letters represent the variable less its mean.BRINNER8.pot EconometricsC o m m o n S t a t i s t i c a l E x p r e s s i o n s : V a r i a n c e o f x : nxtx22 V a r i a n c e o f y : nyty22 C o v a r i a n c e o f x a n d y : nyxttxy2 C o r r e l a t i o n c o e f f i c i e n t f o r x a n d y : yxxyxy2 R e l a t i n g t h e s e e x p r e s s i o n s t o t h e O L S e s t i m a t e d c o e f f i c i e n t , bˆ: xyxyxxxyb22222ˆBRINNER9.pot EconometricsEquation 1Dependent Variable: 100*@PCHY(CD96C)Method: Least SquaresDate: 02/23/02 Time: 16:01Sample(adjusted): 1970:1 2001:3Included observations: 127 after adjusting endpointsVariable Coefficient Std. Error t-StatisticC (1.43) 0.98 (1.45) 100*@PCHY(YD96C) 2.14 0.26 8.13 R-squared 0.35 Mean dependent var 5.35 Adjusted R-squared 0.34 S.D. dependent var 7.19 S.E. of regression 5.84BRINNER10.pot Econometrics-15-10-50510152025-15-10-505101520251970 1975 1980 1985 1990 1995 2000Residual Actual FittedBRINNER11.pot Econometrics-16-12-8-4048121650607080901001101201301970 1975 1980 1985 1990 1995 2000RESID1 JATTCBRINNER12.pot EconometricsEquation 2Dependent Variable: 100*@PCHY(CD96C)Method: Least SquaresDate: 02/23/02 Time: 15:59Sample(adjusted): 1970:1 2001:3Included observations: 127 after adjusting endpointsVariable Coefficient Std. Error t-StatisticC (20.63) 3.13 (6.59) 100*@PCHY(YD96C) 1.55 0.25 6.29 JATTC 0.25 0.04 6.32 JATTC-JATTC(-1) 0.11 0.09 1.29 R-squared 0.53 Mean dependent var 5.35 Adjusted R-squared 0.52 S.D. dependent var 7.19 S.E. of regression 4.98 Add Consumer Confidence, Level and ChangeBRINNER13.pot Econometrics-15-10-50510152025-15-10-505101520251970 1975 1980 1985 1990 1995 2000Residual Actual FittedBRINNER14.pot EconometricsEquation 3Dependent Variable: 100*@PCHY(CD96C)Method: Least SquaresDate: 02/23/02 Time: 16:23Sample(adjusted): 1970:1 2001:3Included observations: 127 after adjusting endpointsVariable Coefficient Std. Error t-StatisticC (18.39) 3.13 (5.87) 100*@PCHY(YD96C) 1.70 0.24 6.95 JATTC 0.21 0.04 5.43 JATTC-JATTC(-1) 0.11 0.08 1.32 RMGFCM_10NS-RMGFCM_10NS(-4) (0.96) 0.33 (2.92) R-squared 0.56 Mean dependent var 5.35 Adjusted R-squared 0.55 S.D. dependent var 7.19 S.E. of regression 4.83 Add the change in the bond interest rateBRINNER15.pot EconometricsEquation 3ADependent Variable: 100*@PCHY(CD96C)Method: Least SquaresDate: 02/23/02 Time: 16:30Sample(adjusted): 1970:1 2001:3Included observations: 127 after adjusting endpointsVariable Coefficient Std. Error t-StatisticC (14.06) 3.31 (4.25) 100*@PCHY(YD96C) 1.62 0.24 6.80 JATTC 0.15 0.04 3.56 JATTC-JATTC(-1) 0.12 0.08 1.50 RMGFCM_10NS-RMGFCM_10NS(-4) (0.87) 0.32 (2.75) 100*@PCHY(HHNETW96C(-1)) 0.34 0.11 3.20 R-squared 0.60 Mean dependent var 5.35 Adjusted R-squared 0.58 S.D. dependent var 7.19 S.E. of regression 4.66 Add the growth of real household net worthBRINNER16.pot EconometricsEquation 4Dependent Variable: CD96CMethod: Least SquaresDate: 02/23/02 Time: 16:34Sample(adjusted): 1970:1 2001:3Included observations: 127 after adjusting endpointsVariable Coefficient Std. Error t-StatisticC (287.40) 16.37 (17.55) YD96C 0.16 0.00 45.65 R-squared 0.94 Mean dependent var 435.49 Adjusted R-squared 0.94 S.D. dependent var 196.51 S.E. of regression 46.93 An alternative approach:Regress the level of spending on the level of incomeWhat is the estimated contemporaneousMPC for consumer durables?The “elasticity”?CD96C YD96C Mean 435.5 4432.4 Std. Dev. 196.5 1170.4Correlation .972BRINNER17.pot EconometricsEquation 5Dependent Variable: CD96CMethod: Least SquaresDate: 02/23/02 Time: 16:45Sample(adjusted): 1970:1 2001:3Included observations: 127 after adjusting endpointsVariable Coefficient Std. Error t-StatisticC (287.55) 15.75 (18.26) YD96C 0.42 0.08 5.42 .25*(YD96C(-1)+YD96C(-2)+YD96C(-3)+YD96C(-4))(0.26) 0.08 (3.33) R-squared 0.95 Mean dependent var 435.49 Adjusted R-squared 0.95 S.D. dependent var 196.51 S.E. of regression 45.15 Explore effects of lagged income.Note negative coefficient!BRINNER18.pot EconometricsEauation 6Dependent Variable:
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