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Use the data set CONSUMP.RAW for this exercise.
(i) Estimate a simple regression model relating the growth in real per capita consumption (of nondurables and services) to the growth in real per capita disposable income. Use the change in the logarithms in both cases. Report the results in the usual form. Interpret the equation and discuss statistical significance.
(ii) Add a lag of the growth in real per capita disposable income to the equation from part (i). What do you conclude about adjustment lags in consumption growth?
(iii) Add the real interest rate to the equation in part (i). Does it affect consumption growth? |
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