Using data on 76 countries, we estimate a relationship between the growth rate in prices, INFLAT, and the rate of growth in the money supply, MONEY. The least squares estimates of the model are as follows:

The data summary statistics are as follows:

Table 4.3 contains the data and some diagnostics for several observations.

a. Determine observations for which LEVERAGE is large. What is your rule?

b. Determine observations for which EHATSTU (the studentized residual) is large. What is your rule?

c. Determine observations for which DFBETAS is large. What is your rule?

d. Determine observations for which DFFITS is large. What is your rule?

e. Sketch the fitted relationship. On the graph locate the point of the means, and medians, and the nine data points in Table 4.3. Which observations are remote, relative to the center of the data, the point of the means and medians?

Transcribed Image Text:

INFLAT -5.57 +1.05MONEY R2 = 0.9917 (se) (0.70) (0.11)