Question

Consider the following model: Y = β₁ + β₂X_2t + β₃X_3t + γ₄Y_t-1. Using a sample of 36 months, we estimate this model and obtain the following results:
y_t = 1.33 + 17.6x_2t + 0.94x_3t + 0.39Y_t-1
(0.02) (2.3) (3.35) (0.015)
R² = 0.89 DW = 2.86 (Durbin Watson statistic)

What is the short run impact effect of an increase in X3 of 1-unit in time t, by how much would we expect Y to change in period t?

• A. 0.37
• B. 0.94
• C. 2.02
• D. 17.6

Answer 1

ANSWER::

yt = 1.33 + 17.6x2t + 0.94x3t + 0.39Yt-1

What is the short run impact effect of an increase in X3 of 1-unit in time t, by how much would we expect Y to change in period t?

If X3 is incresed of 1 unit in time t then Y is incresed by 0.94 units in period t.

ANSWER: OPTION (B).....[0.94]

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