1. Economics 310 Lecture 11 Dummy variables and Varying Parameters models

2. Multiple dummy variables

3. More than one Qualitative Variable Y X

4. Varying Parameter Model

5. First Model X Y

6. Second Model X Y

7. Testing for Structural Stability Chow-Test

8. Testing for Structural Stability Dummy Variable-Test

9. Dummy variables and heteroscedasticity To do the Chow test, we must assume that the variance of the disturbance in each regression is same. This holds for dummy variable test for structural change. We can’t have heteroscedasticity. Can test this assumption with F-test.

10. Piecewise Linear Regression Y X X*

11. Piecewise Linear Regression

12. Sample data for Piecewise regression

13. Results of Piecewise Regression

14. Interpretation of dummy variable in semi-log regression

15. Semi-log Example

16. Interpretation of Coefficients