Question
The following two models are being considered for studying the behaviour of poverty rates in a country (Y, in percentage) over the time-period 1970-2010
The following two models are being considered for studying the behaviour of poverty rates in a country (Y, in percentage) over the time-period 1970-2010 (t-ratios are reported in parentheses). Model A: = 54.094 +0.122 lt R = Schwarz criterion= Adjusted Model B: (196.910) (10.491) 0.898, Akaike info criterion = 34.553. 37.546 , = 53.777 +0.177t - 0.0016t t = (153.1) (3.730) (-5.777) R = 0.907 Adjusted Akaike info criterion = 32.571 Schwarz criterion= 37.061 (i) Comment on the change in poverty rate, as per Model A results. (ii) Describe the behaviour of poverty rate as per Model B results. (iii) Using the measures of goodness of fit reported in the regression results, which model would you choose? Give reasons.
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