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In: Economics

Using Y as the dependent variable and X1, X2, X3, X4 and X5 as the explanatory...

Using Y as the dependent variable and X1, X2, X3, X4 and X5 as the explanatory variables, formulate an econometric model for data that is (i) time series data (ii) cross-sectional data and (iii) panel data – (Hint: please specify the specific model here not its general form).

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Expert Solution

*An econometric model involving time series data

Yt = B1+B2X1t + B3X2t+B4X3t+B5X4t+ B6X5t+ut

Yt = Dependent variable or explained variable.

B1= intercept.

X1t,X2t+X3t+X4t+X5t = Explanatory Variables.

B2, B3, B4, B5 , B6 = coefficients of X1t, X2t, X3t, X4t, and X5t

ut = random error term or stochastic error term.

( Time series data consists of observations collected at specific intervals of time. So t subsrict will be a must in the model.)

2).An econometric model involving cross sectional data .

Yi = B1+B2X1i+ B3X2i+B4X3i+B5X4i+B6X5i+ui

Yi = Dependent variable

B1 = intercept

X1i, X2i, X3i, X4i, X5i = Explanatory Variables.

B2,B3,B4,B5,B6. - Coefficients of X1i, X2i, X3i, X4i, and X5i

ut = Random error term.

( Cross section data is collected from different individuals or groups at a point of time. Subcript used in the model is 'i'. )

* Econometric model involving panel data.

Yit = B1+B2X1it +B3X2it+B4X3it+B5X4it+B6X5it+ut

Yit =Development variable.

B1= intercept

X1it,X2it, X3it, X4it,X5it = Explanatory Variables

B2,B3,B4,B5,B6 = coefficients of X1it,X2it,X3it,X4it and X5it

ut = random error term.

( Panel data is actually cross sectional data surveyed in over time. So subcripts 'i' and 't' will be there.)

Rahul Sunny answered 7 months ago
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