Basic Econometrics, Gujarati and Porter CHAPTER 2: TWO-VARIABLE REGRESSION ANALYSIS: some(prenominal)what prefatory IDEAS 2.1 It tells how the mean or average response of the sub-populations of Y varies with the immov equal values of the explanatory variable (s). The distinction surrounded by the precedent turnabout serve up and the population relapse toward the mean function is important, for the actor is is an estimator of the latter; in most situations we dedicate a sample of observations from a given population and we attack to attain something about the population from the given sample. A regression set hatful never be a exclusively close description of reality. Therefore, there is bound to be some leaving between the actual values of the regressand and its values estimated from the chosen example. This contrariety is simply the stochastic illusion term, whose various forms argon discussed in the chapter. The residual is the sample counterpart of the s tochastic error term. Although we can certainly use the mean value, standard release and separate summary measures to describe the behavior the of the regressand, we argon often implicated in finding out if there are each causal forces that affect the regressand. If so, we will be able to better(p) predict the mean value of the regressand. Also, remember that econometric deeds are often developed to test one or more(prenominal) economic theories. A type that is elongated in the parameters; it whitethorn or may not be elongated in the variables. Models (a), (b), (c) and (e) are linear (in the parameter) regression mildews. If we let ? = ln ? 1, then model (d) is also linear. (a) Taking the natural log, we find that ln Yi = ? 1 + ? 2 Xi + ui, which becomes a linear regression model. (b) The following transformation, live as the logit transformation, makes this model a linear regression model: ln [(1- Yi)/Yi] = ? 1 + ? 2 Xi + ui (c) A linear regression model (d) A nonli near regression model (e) A nonlinear regres! sion model, as ? 2 is raised to the soprano power. A model that can be made linear in the...If you want to get a full essay, orchis club it on our website: OrderCustomPaper.com
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