3 Questions
What is the coefficient estimate for the static model?
The coefficient estimate for the static model is 0.27, which means that a one percent increase in the inflation rate is associated with a 0.27 percent increase in GDP growth.
What are the assumptions that need to hold for the inference to be valid?
The assumptions that need to hold for the inference to be valid include that the model is linear and that the errors are independent and identically distributed.
Is the reliability of the regression results sufficient enough to conclude that a long run relationship exists between GDP growth and inflation?
The reliability of the regression results alone is not sufficient to conclude that a long run relationship exists between GDP growth and inflation. Further analysis such as a dynamic model and Granger causality tests are needed to further assess the relationship between GDP growth and inflation.
Test your knowledge of coefficient estimates, inference assumptions, and the reliability of regression results for establishing long run relationships between economic variables.
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