What can be done to improve the estimation

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Reference no: EM131028657

A student has submitted her final dissertation in which she has estimated the following model using Zambian data:

Dln Const= B0+ B1Dln GDPt+ B2Dln CPIt+ B3DRt+ et

WhereDis the first difference operator,

Consis private consumption

GDP is gross domestic product,

CPI is consumer price index,

R is the three-month Treasury bill rate.

The sample is: 1969 (2) to 1994 (1)

Variable	Coefficient	Std.Error	t-value	HCSE
Constant	0.01692	0.00338	5.001	0.004597
Dln GDPt	0.36086	0.09173	3.934	0.093796
Dln CPIt	0.25917	0.16066	1.613	0.241880
DRt	0.00131	0.00103	1.269	0.001131

R2= 0.174366

F(3,96) = 6.7581 [0.0003]
DW = 2.35
RSS = 0.02298197499 for 4 variables and 100 observations
AR 1- 2 F( 2, 94) = 1.8497 [0.1630]
ARCH 4 F( 4, 88) = 2.6102 [0.0408] *
Normality X2(2)= 4.4048 [0.1105]
RESET F( 1, 95) = 0.94744 [0.3328]

a) Identify the problems in the estimated model.

b) What can be done to improve the estimation?

Reference no: EM131028657

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