1. What is the object, the model in econometrics? The klein's Econometric model. Write the initial form of the model. Comment how to apply principle of specifications of econometrics model and postulates of the Gauss-Markov Theorem. Transform the initial form of the model to reduced form.
2. The normal equations for the regression coefficients formulas for estimates b1 and b2.
3. The output below gives the result of regressing FDHO, annual household expenditure on food consumed at home, on EXP, total annual household expenditure, both measured in dollars, using the Consumer Expenditure Survey. Give an interpretation of the coefficients. Write a specification of the Econometric Model. Which of the model coefficient is significant? Explain. Give an interpretation of R2 and F-test result.
| Source |
SS |
df |
NS |
|
Number of obs = 868 |
| Model |
911005795 |
1 |
911005795 |
|
F( 1, 866_ = 360.37 |
| Residual |
2.07E+09 |
866 |
2395045.39 |
|
Prob > e = 0.000 |
| Total |
2.99E+09 |
867 |
3443039.33 |
|
R-squared = 0.3052 |
|
|
|
|
|
Adj R-squared = 0.3044 |
|
|
|
|
|
Root MSE = 1547.6 |
| FDHO |
Coef. |
Std.Err. |
t |
P>|t| |
|
95% conf. Interval |
| EXP |
0.0527204 |
0.0027032 |
19.8 |
0 |
|
0.0474149 |
0.058026 |
| _cons |
1922.938 |
96.30698 |
19.53 |
0 |
|
1733.323 |
2112.334 |