You have been asked to consider a regression model which relates the behaviour of three time series, Yt , Xt , Zt where

[answerhappygod]

You have been asked to consider a regression model which relates
the behaviour of three time series, Yt , Xt , Zt where t = 1, 2, .
. . , T. The proposed model is as follows:
Yt = β0 + β1Xt + β2Xt^2 + β3Zt + ut
Before relying on the results of an ordinary least squares (OLS)
estimate of the model above identify two issues you might
investigate. For each of the two issues you should:
(i) Define the issue in the context of the model.
(ii) Identify what issues this might cause when relying on the
results of the OLS regression.
(iii) Explain how you would test for the presence of the
issue.
(iv) Suggest how you might solve the problem in order to obtain
useful estimates of the model
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