It was stated previously that in the case of perfect multicollinearity the regression coefficients remain indeterminate and their standard errors are infinite. This fact can be demonstrated readily in terms of the three-variable regression model. Using the deviation form, where all the variables are expressed as deviations from their sample means, we can write the three-variable regression model as yi = Pi xii + 03 x3i + Ui (10.2.1)
Now from Chapter 7 we obtain
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