Question: Often the functional relationships between variables change over time. Tests can be conducted to determine whether or not there has been a change in values of the coefficients. During Week 2, you estimated a consumption function for the period 1960 to 1990. This week you will estimate one for the 1991 to 2005 period and test to see if the estimated values of "b" are the same or different for the two periods. As part of this analysis, you will be using a dummy variable, which is a 0 or 1 variable that used to separate the observations into ones that have a certain characteristic and ones that do not.

Estimate the following equations and perform a Chow Test on the results (see text starting on page 273):

Estimate the consumption function (C = a + b DPI) for the following periods
1960 to 1990
1991 to 2005
1960 to 2005

Price: $2.99

Solution: The downloadable solution consists of 6 pages
Deliverable: Word Document