The regression specified for private investment is I= a1 + a2 Y + a3 CRD+ u. The results from estimating the regression are presented below. The sample covers the annual series spanning from 1981-2020 (n=40). It =2.4 + 0.75Yt + 0.45CRDt (1.02) (0.26) (0.12) R2 = 0.78 , D-W-d= 1.95 where I, Y and represent real private investment, real GDP and real credits respectively. Suppose you would like to perform the test for the first order autocorrelation using the LM type test technique. Define the auxiliary regression. Also suppose you found R-squared from the auxiliary regression to be 0.082, perform the LM test for the first order autocorrelation and interpret the result.
The regression specified for private investment is I= a1 + a2 Y + a3 CRD+ u. The results from estimating the regression are presented below. The sample covers the annual series spanning from 1981-2020 (n=40). It =2.4 + 0.75Yt + 0.45CRDt (1.02) (0.26) (0.12) R2 = 0.78 , D-W-d= 1.95 where I, Y and represent real private investment, real GDP and real credits respectively. Suppose you would like to perform the test for the first order autocorrelation using the LM type test technique. Define the auxiliary regression. Also suppose you found R-squared from the auxiliary regression to be 0.082, perform the LM test for the first order autocorrelation and interpret the result.

Step by step
Solved in 3 steps with 21 images









