Chapter12经济.pptVIP

 Chapter 12 Multicollinearity: What Happens if Explanatory Variables are Correlated  In cases of perfect linear relationship or perfect multicollinearity among explanatory variables, we cannot obtain unique estimates of all parameters. And since we cannot obtain their unique estimates, we cannot draw any statistical inferences (i.e., hypothesis testing) about them from a given sample. For Example: The Demand for Widgets Original Model: Yi=A1+A2X2i+A3X3i+μi Transformation: X3i =300－2X2i Yi =A1+A2X2i+A3 ( 300－2X2i )