* Multicollinearity in OLS Model for Consumption Expenditure * * Keywords: * regression, ols, linear, multicollinearity, consumption, expenditure * * Description: * We illustrate how to estimate a linear OLS Model for Consumption * Expenditure and show what problems Multicollinearity may cause * * Author(s): * Skif Pankov * * Source: * Damodar N. Gujarati and Dawn C. Porter, Basic Econometrics - 5th Edition * McGraw-Hill International Edition, Chapter 10, Example 10.1 (page 332) * sample 1 10 * Reading the datafile and naming variables read(data_10.1.shd) cons inc wlth * Running an OLS regression of cons on inc and wlth, stating to include residual * statistics ols cons inc wlth / rstat * Running an OLS regression of wlth on inc (one regressor on another), stating * to include residual statistics ols wlth inc / rstat * Running separate OLS regressions of cons on inc (in one case) and on wlth (in * another) ols cons inc ols cons wlth stop