6.20  Suppose you fit the following version of the Phillips curve to the data given in table 6.4

                                                         Yt = B1 + B2Xt + ut
 
 
 

Year
Year to year increase in wage rate, % (Y)
Unemployment % (X)
1950
1.8
1.4
1951
8.5
1.1
1952
8.4
1.5
1953
4.5
1.5
1954
4.3
1.2
1955
6.9
1.0
1956
8.0
1.1
1957
5.0
1.3
1958
3.6
1.8
1959
2.6
1.9
1960
2.6
1.5
1961
4.2
1.4
1962
3.6
1.8
1963
3.7
2.1
1964
4.8
1.5
1965
4.3
1.3
1966
4.6
1.4

(a) A priori, what is the expect sign of B2?  (Suggested Answer)

(b) Estimate this regression, obtaining the usual statictics.(Eviews)

(c) How do these results compare with those of regression (6.6.2)? Is there any conflict reaults?
     (Suggested Answer)

(d) Can you compare the two r2?  (Suggested Answer)

(e) Which model do you prefer ? Why?  (Suggested Answer)