* OLS Model for Phillips Curve * * Keywords: * regression, ols, phillips curve, inverse, reciprocal, graph * * Description: * We illustrate how to estimate Linear and Reciprocal OLS Models for * Phillips Curve and create a graph * * Author(s): * Skif Pankov * * Source: * Damodar N. Gujarati and Dawn C. Porter, Basic Econometrics - 5th Edition * McGraw-Hill International Edition, Chapter 6, Example 6.7 (page 170) * sample 1 47 * Reading the datafile and naming variables read(data_6.7.shd) inflrate unrate * Generating a yearly change in inflation rate and saving it as d1infl genr d1infl = inflrate - lag(inflrate) * Generating an inverse of the unemployment rate and saving it as invun genr invun = 1/unrate * Running an OLS regression of d1inflrate on unrate specifying to start from * the second observation and to display residual statistics ols d1infl unrate / beg=2 rstat * Running an OLS regression of d1inflrate on invunrate, * again specifying to start from the second observation: ols d1infl invun / beg=2 end=47 rstat * Plotting d1inflt against unrate graph d1infl unrate stop