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Tue 21 May, 2019 07:20 am
Hi, i am having trouble answering this econometrics question. could someone offer some help please.
The linear model under consideration is given by:
y_t=β_1+β_2 x_2t+β_3 x_3t+β_4 x_4t+u_t
Suppose that an investigator wishes to test whether x_3 and x_4 could in fact be dropped from the equation without significantly worsening the fit of the equation to the data. Outline a suitable test, explain how the test statistic is calculated, and give the distribution of the test statistic under the null hypothesis.
Thank you!