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In October 1979, the Federve changed its policy of using finely tuned interest rate adjustments and instead began targeting the money supply. Using the data in INTDEF, define a dummy variable equal to 1 for years after 1979 . Include this dummy in equation $(10.15)$ to see if there is a shift in the interest rate equation after $1979 .$ What do you conclude?

See video for full results. $\beta_{post79} = 1.56$, t-stat = 3.1. Dummy significant and economically large. Compared to prev regression, coefficient of def decreases.

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Chapter 10

Basic Regression Analysis with Time Series Data

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we will define a new dummy. Variable post 79. This variable takes a value of one for years after 1979 and it takes a value of zero. Otherwise, we will include this dummy in the equation 10.15 and estimate the equation again. This is what we get. The coefficient of past 79 is 1.56 about divided for its standard error. We have 80 start of 3.6 and this is greater than a critical value. If you could look up in there t distribution table. So this variable this dummy is highly significant. Let me move down. The dummy variable is statistically significant, but also economically large, helping for inflation and deficits. I three was about 1.56 points higher on average in years after 1979. Another thing we can observe from this equation and equation 10.15 is the coefficient on Deft has fallen

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