Econometrics: diagnostic test for regression modelWatch
Hi, I managed to deduce in e that there is a structural change after conducting the F test for the restricted and unrestricted models. My conclusion is that the restriction doesn't hold which I believe answers what e asks for.
I don't quite get f and g at this point. Part f is asking for what test that can be used to test for this significant change in K and L. I can't think of any diagnostic test for this; I believe t-test is the best way to solve the but I am not sure. I also don't know which one of the two unrestricted regression to test this on; what can we work this out?
To add on: I am struggling to work out what test to run. Both unrestricted models pass the reset test, BG test and JB test. I think I am unsure about what the question means by 'significant change in capital and labour. I think t-test will be the answer but how can we identify which regression models to test on?
g asks for how model can be improved, so I am thinking about multicollinearity and using IVF to test for it. Since they have already included the lagged variable; I am just guessing the inclusion of dummy variable is also required to test for seasonal variation. What more can I add here?
Thanks a lot.