Consider the Following Model Y t = β 0 + β 1 X t $\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1$

The Answer of Consider the Following Model Y t = β 0 + β 1 X t $\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1$

Consider the Following Model Y t = β 0 + β 1 X t $\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1$

The Answer of Consider the Following Model Y t = β 0 + β 1 X t $\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1$

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Consider the Following Model Y_t = β₀ + β₁X_t $\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1$

Question 46

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Consider the following model Y_t = β₀ + β₁X_t + β₂X_t_-₁ + β₃Y_t_-₁ + u_t, where X_t is strictly exogenous. Show that by imposing the restriction $\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1$ , you can derive the following so-called Error Correction Mechanism (ECM)model
△Y_t = β₀+ β₁△X_{t -}θ(Y - X)_t_-₁ + u_t
where θ = β₁+ β₂. What is the short-run (impact)response of a unit increase in X? What is the long-run solution? Why do you think the term in parenthesis in the above expression is called ECM?

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Starting with Y_t = β₀ + β₁X_t + β₂X_t_-₁ + β₃Y_t_-₁ + u_t, ...
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Consider the Following Model Yt = β0 + β1Xt ∑i=13βi=1\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1∑i=13​βi​=1

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Correct Answer:VerifiedStarting with Yt = β0 + β1Xt + β2Xt-1 + β3Yt-1 + ut, ...View AnswerUnlock this answer nowGet Access to more Verified Answers free of chargeView Full Answer For Free

Consider the Following Model Y_t = β₀ + β₁X_t $\sum _ { i = 1 } ^ { 3 } \beta _ { i } = 1$

Correct Answer:
Verified
Starting with Y_t = β₀ + β₁X_t + β₂X_t_-₁ + β₃Y_t_-₁ + u_t, ...
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge