Recall that if X and Y are zero mean random variables and we are running a regression of the form Y = BX+v where E(X\v)

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Recall That If X And Y Are Zero Mean Random Variables And We Are Running A Regression Of The Form Y Bx V Where E X V 1 (169.77 KiB) Viewed 32 times

Recall that if X and Y are zero mean random variables and we are running a regression of the form Y = BX+v where E(X\v) = 0, then 6 = CODXY) TAX) (2 points) Show that 72 where z1 = 0 2+ + €) +1. Therefore an agents best guess of z is 8(2 +e). By definition p(x) = p +z so that an agent's best guess of the aggregate price level given that they observe p.(z) is the expectation of pr given their information 1 (z). The information for producer z at time I would be equal to the informa- tion they compiled up to just before t, ie 1-1 and their price pr(s). Therefore, E (p1|1(2)) = E (11-1.7.(2)). • (2 points) Show that E (pt | 11-1p:(z)) = (1 - 0)pı(z) + BE (p: | 1-1). = ): (2)