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Introductory Econometrics 4th Edition by Jeffrey Wooldridge
Edition 4ISBN: 978-0324660609Introductory Econometrics 4th Edition by Jeffrey Wooldridge
Edition 4ISBN: 978-0324660609 Exercise 4
Suppose that the idiosyncratic errors in (14.4), {uit: t = 1, 2,...,T}, are serially uncorrelated with constant variance, 2u. Show that the correlation between adjacent differences, uit and ui,t+1, is -.5. Therefore, under the ideal FE assumptions, first differencing induces negative serial correlation of a known value.
Explanation
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Introductory Econometrics 4th Edition by Jeffrey Wooldridge
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