Classical investment theory believes thatrsquos investment, Ask an Expert

Economics

Classical Investment theory believes that’s investment depends on real GDP and real investment rate. You are estimating an investment model based on theory as:

I= B0+B1+B2r+U Where I is investments, Y is real GDP, r is the interest rate, and U is stochastic error terms.

What are the statically error problems that you may face in estimating the model?

What is the effect on the coefficient if the necessary corrections are not implemented?

What type of estimation method (OLD,IV, NL) is needed to achieve a consistent estimate of B coefficient (Write the procedure)?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91848272

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