You Have Collected Data for Real GDP (Y)and Have Estimated $\hat { Y }$

question 49

Essay

You have collected data for real GDP (Y)and have estimated the following function:
ln $\hat { Y }$ _t = 7.866 + 0.00679×Zeit
(0.007)(0.00008)
t = 1961:I - 2007:IV, R² = 0.98, SER = 0.036
where Zeit is a deterministic time trend, which takes on the value of 1 during the first quarter of 1961, and is increased by one for each following quarter.
a. Interpret the slope coefficient. Does it make sense?
b. Interpret the regression R². Are you impressed by its value?
c. Do you think that given the regression R², you should use the equation to forecast real GDP beyond the sample period?

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