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Assume That You Had Found Correlation of the Residuals Across

question 17

Essay

Assume that you had found correlation of the residuals across observations.This may
happen because the regressor is ordered by size.Your regression model could therefore
be specified as follows: Yi=β0+β1Xi+uiui=ρui1+vi;ρ<1.\begin{array} { c } Y _ { i } = \beta _ { 0 } + \beta _ { 1 } X _ { i } + u _ { i } \\u _ { i } = \rho u _ { i - 1 } + v _ { i } ; | \rho | < 1 .\end{array}
Furthermore, assume that you had obtained consistent estimates for β0,β1,ρ\beta _ { 0 } , \beta _ { 1 } , \rho . If asked to make a prediction for YY , given a value of X(=Xj)X \left( = X _ { j } \right) and u^j1\hat { u } _ { j - 1 } , how would you proceed? Would you use the information on the lagged residual at all? Why or why not?


Definitions:

Reconciliation

As it relates to cultural groups, efforts to bring about peaceful and nonviolent relationships between ethnic groups previously in conflict as well as between perpetrators and victims.

Truth

The quality or state of being in accordance with fact or reality, often considered from philosophical, moral, or factual perspectives.

Trauma Victims

Individuals who have experienced deeply distressing or disturbing events, affecting their emotional and psychological well-being.

Unique Role

A specific, distinctive position or function assumed or assigned to someone or something in a particular context.

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