Econometrics Essay

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Question 1 OLS GRETL output for model 1 * Regression equation: PHG=const+Gp+Inc+Pnc+Puc+Ppt+Pd+Pn+Ps+T PHG=1105.88-11.0839Gp+0.215749Inc+0.577349Pnc-5.87463Puc+6.90726Ppt+1.22888Pd+12.6905Pn-28.0278Ps+72.5037T * Standard errors: (569.379), (0.0517619), (3.97812), (12.8441), (4.87032), (4.83613), (11.8818), (12.5980), (7.99625), (14.1828) * Test statistics: (1.942), (4.168), (-2.786), (0.04495), (-1.206), (1.428), (0.1034), (1.007), (-3.505), (5.112) * Number of observations = 52 (1953-2004) * Goodness of fit statistic: 0.991285 * F-value (9,42): 530.8181 We would expect the coefficient of income (Inc) to be positive and hence as income increases so does the per household consumption of gasoline (PHG). Which is the case in this OLS model. It if expected that the coefficient of the price index for gasoline (Gp) will be negative, because it is expected that as gasoline prices increase the per household consumption of gasoline will decrease. According to OLS this is true due to the negative sign in front of the (Gp) variable. We would expect that the coefficient of price index for new cars (Pnc) t be negative, because as prices of new cars increase it would be expected that households will decrease their consumption of fuel. But it can be seen from the OLS model that the coefficient is positive meaning that as prices of new cars increase households increase their consumption of fuel. The coefficient of the price index for used cars (Puc) is expected to be negative because as the prices of used cars increase the household of consumption will decrease. And as is shown previously the value in the OLS model is negative corresponding with what is expected. It would be expected that the coefficient of the price index for public transportation (Ppt) to be positive because as prices of public transportation increase,

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