Method of steepest descent, 569 Micronumerosity, 342, 348, 355 Micro panel data, 28 Minimum mean-square-error estimator, 901 Minimum variance, 900 Minimum-variance property,

104-105 Minimum-variance unbiased estimators, 110 MINITAB, 147 Minor of a matrix, 923 Mizon-Richard encompassing test, 536 Model mis-specification, versus pure autocorrelation, 475-476 Model mis-specification errors, 509-510

Models; see also Regression models adaptive expectations, 670-672 autoregressive, 468, 534-535 avoidance of data mining, 74n bottom-up approach, 515-516 choosing among, 10-12 of consumption function, 4-6 for control or policy purposes, 9-10 dichotomous dependent variable, 322

distributed lag, 532, 534-535 econometric, 5 estimation of, 7-8 linear regression, 5 logit, 595-597

as maintained hypothesis, 515 multiple equation, 5 nested or non-nested, 529-530 overfitted, 510, 513-514, 515-517 polytomous dependent variable, 322 probit, 608-615 qualitative response, 580-582 random walk, 798-801 single-equation, 5, 15 specification of, 73-75 simultaneous-equation, 715-730 underfitting, 510 Model specification bias, 506 Model specification errors, 506, 509-510 consequences of, 510-514 Modifed d test, 470-471 Modified Phillips curve, 187 Modified R2, 218 Moment, 94 Monetarism, 166, 532

Monetarists, 510 Money creation, 659 demand functions, 136 and prices, 650 Money market equilibrium model,

722-723 Money supply, 34-35, 532,

826-827 Money supply function, 770-771 Monte Carlo experiment, 13,

91-92, 399-400, 409, 456, 501, 554 example, 727-729 Monthly data, 25 Moving average processes, 839 Moving averages, 473, 474 Multicollinearity, 75, 204-205 Ballentine view of, 344 definition, 342-345 detection of, 359-363 and distributed lag models, 691 estimable function, 347n example, 356-358, 370-374 high but imperfect, 347-348 merits of, 369-370 perfect conditions, 344 estimation of presence of, 345-347 practical consequences, 350-356 coefficient of determination, 354 micronumerosity, 356 sensitivity to small changes in data, 354-355 t ratio, 354

variance of OLS estimators,

350-353 wider confidence intervals, 353 remedial measures doing nothing, 363-364 rule-of-thumb procedures, 364-369 sources of, 345 theoretical consequences, 348-350 Multicollinearity problem, 341 Multinomial logit, 561 Multiple-category response variable, 581 Multiple coefficient of correlation,

212-213 Multiple coefficient of determination, 212-213 Multiple equation model, 5

Multiple regression, 25, 37, 202; see also Three-variable model; Two-variable model child mortality example, 249-250 Chow test, 275-279 definition, 205 F test, 257-259 hypothesis testing about individual regression coefficients, 250-253 forms of, 250 Lagrange multiplier test, 280 likelihood ratio test, 280,

294-296 linear versus log-linear models, 280-282 maximum likelihood estimation, 246

normality assumption, 248-249 overall significance testing,

253-264 polynomial models, 226-229 prediction with, 279 restricted least squares, 266-273 role of R2, 223

simple regression in context of, 215-217

testing equality of two regression coefficients, 264-266 testing for structural or parameter stability, 273-279 Wald test, 280 Multiple regression equation, 205 Multiple regression matrix notation, 940-942 Multiplicative stochastic error term, 191-192 MWD test, 280-282

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