Introductory Econometrics 4th Edition by Jeffrey Wooldridge

تمرين 11

Consider the error correction model in equation. Show that if you add another lag of the error correction term, yt-2 - xt-2, the equation suffers from perfect collinearity. (Hint: Show that yt-2 - xt-2 is a perfect linear function of yt-1 - xt-1, xt-1, and yt-1.)
Equation