An Illustrative Example

To illustrate the J test, consider the data given in Table 13.3. This table gives data on per capita personal consumption expenditure (PPCE) and per capita disposable personal income (PDPI), both measured in 1987 dollars, for the United States for the period 1970-1991. Now consider the following rival models:

Model A: PPCE; = «1 + «2PDPIt + «3PDPIi—1 + u, (13.8.7)

Model B: PPCE, = fa1 + fa2PDPI, + fa3PPCE,—1 + u, (13.8.8)

ModelAstatesthat PPCE depends on PDPI in the current and previous time period; this model is an example of what is known as the distributed lag model (see Chapter 17). Model B postulates that PPCE depends on current PDPI as well as PPCE in the previous time period; this model represents what is known as the autoregressive model (see Chapter 17). The

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Rules Of The Rich And Wealthy

Rules Of The Rich And Wealthy

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