Extracted text: For the period 1970-1991 for the United States the following two rival consumption models were estimated using the data on personal consumption expenditure (PPCE) and per capita disposable personal income (PDPI). R' = 0,988 AIC = 12,91 SC=13,06 Model A: PPCE, = 1299,05 + 0,9204PDPI, +0,0931PDPI_1 t= (4,03) (6,01) (0,63) Model B: PPCE, =-841,85+0,7117PDPI, + 0,2954PPCE,. R =0,9912 t= (-2,41) (5,46) (2,36) AIC=12,66 SC=12,81 To choose between those two alternative models Davidson MacKinnon J test is applied. The results are as follows: PPCE, = -1322, 79+0,7061PDPI, – 0,4357 PDPI,, +2,1335PPCE? R = 0,9932 SE = (832,15) (0,5058) (0,1987) (0,6437) where PPCE are the estimated PPCE values from Model B. PPCE, = -6549,86+5,1176PDPI, + 0, 6302PPCE,1 – 4,6776PPCE; R? = 0,9920 SE = (2622,46) (2,0129) (0,1845) (17,4082) where PPCE are the estimated PPCE values from Model A. a) Decide the better model by using model selection criteria of Akaike and Schwarz. b) According to the J test results which model is better? |