Introductory Econometrics 4th Edition by Jeffrey Wooldridge

تمرين 21

Use CONSUMP.RAW for this exercise.
(i) Let yt be real per capita disposable income. Use the data through 1989 to estimate the model
yt = + t + yt-1 + ut
and report the results in the usual form.
(ii) Use the estimated equation from part (i) to forecast y in 1990. What is the forecast error
(iii) Compute the mean absolute error of the one-step-ahead forecasts for the 1990s, using the parameters estimated in part (i).
(iv) Now, compute the MAE over the same period, but drop yt- 1 from the equation. Is it better to include yt- 1 in the model or not