Multicollinearity
Multicollinearity is a statistical phenomenon in regression analysis where two or more explanatory variables in a model are highly linearly correlated, making it difficult to isolate the individual effect of each variable on the dependent variable. In applied econometrics, this is a crucial issue because it affects the reliability and interpretability of estimated coefficients. When multicollinearity exists, standard errors of ____ _________ _______ ______ ______ _____ __________ __________ _______ _________ ______.
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Consider the following Keynesian model of income determination
Where,
C= Consumption expenditure
I=Investment expenditure
Y=Income
G=Government expenditure
G₁ and Yt-1 are assumed predetermined
(a) State the reduced form equations and determine which of the preceding equations are identified.
(b) Which method will you use to estimate the parameters of the over identified equation and of the exactly identified equation? Justify your answer.
What do you mean by the term 'lags' in the context of economic data? Explain the various methods to estimate the distributed lag models.
Empirical Research.
A research study intends to examine the impact of self-employment scheme for rehabilitation of manual scavengers. Suggest an appropriate research design to undertake such a study giving reasons the kind of research design you have suggested.
Fixed effect Model and Random effect model.
What is panel data? Explain the main advantages of panel data over 'pooled data'.
Distinguish between ordinary least square method and indirect least square method of estimation. Specify the conditions under which indirect least method is applied.