Solved

(Requires Matrix Algebra)Consider the Time and Entity Fixed Effect Model

Question 46

Essay

(Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable
Yit = β0 + β1Xit + (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? D2i + ...+ (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? Dni + δ2B2t + ...+ δTBTt + uit,
For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general,
Y = (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? ,U = (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? ,X = (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? = (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? ,and β = (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? = ( (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? X)-1 (Requires Matrix Algebra)Consider the time and entity fixed effect model with a single explanatory variable Yit = β0 + β1Xit + D2i + ...+ Dni + δ2B2t + ...+ δTBTt + uit, For the case of n = 4 and T = 3,write this model in the form Y = Xβ + U,where,in general, Y = ,U = ,X = = ,and β = How would the X matrix change if you added two binary variables,D1 and B1? Demonstrate that in this case the columns of the X matrix are not independent.Finally show that elimination of one of the two variables is not sufficient to get rid of the multicollinearity problem.In terms of the OLS estimator, = ( X)-1 Y,why does perfect multicollinearity create a problem? Y,why does perfect multicollinearity create a problem?

Correct Answer:

verifed

Verified

For the case of n = 4 and T = 3,the gene...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q36: The main advantage of using panel data

Q41: In Sports Economics,production functions are often estimated

Q42: Consider the time and entity fixed effect

Q42: A study attempts to investigate the role

Q44: Your textbook modifies the four assumptions for

Q45: Consider the following panel data regression with

Q45: Give at least three examples from macroeconomics

Q47: Your textbook specifies a simple regression problem

Q48: "Empirical studies of economic growth are flawed

Q48: Your textbook reports the following result from

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents