In studying the farm demand for tractors, Griliches used the following model*:
17.13. In studying the farm demand for tractors, Griliches used the following model*:
T * β1 β2
t = α X1,t−1 X2,t−1
where T* = desired stock of tractors X1 = relative price of tractors X2 = interest rate
Using the stock adjustment model, he obtained the following results for the period 1921–1957:
l---og Tt = constant − 0.218 log X1,t−1 − 0.855 log X2,t−1 + 0.864 log Tt−1
(0.051) (0.170) (0.035)
R2 = 0.987
where the figures in the parentheses are the estimated standard errors.
a. What is the estimated coefficient of adjustment?
b. What are the short- and long-run price elasticities?
c. What are the corresponding interest elasticities?
d. What are the reasons for high or low rate of adjustment in the present model?
Answers
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Posted 03 May 2017 12:05 PM
My Price 9.00
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