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Describe the Cochrane-Orcutt Iterative procedure to correct for first order autocorrelation in the model Yt =...

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Economics

Describe the Cochrane-Orcutt Iterative procedure to correct forfirst order autocorrelation in the model Yt = B0 + B1X1 + B2X2 +ut

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1 Run OLS regression on Y B0 B1X1 B2X2 Ut and find the residuals e1 e2 2Using these sample residuals ei find an estimate for p using OLS regression on ej pej1 uj 3 Substitute this estimate for in the generalized difference equation Yi B0 B1Xi1 B2 Xi2 ui    See Answer
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