Multivariate Analysis of Economic Variables

G. Gudmundsson

Journal of the Royal Statistical Society Series C, 1977, vol. 26, issue 1, 48-59

Abstract: In econometric models each dependent variable is usually a linear function of a small number of dependent and independent variables which are selected on economic considerations. Here uncorrelated linear combinations of all independent variables are used for explaining every dependent variable. The linear combinations are selected by maximizing the sum of their squared correlation coefficients with the dependent variables. Two numerical examples are given by data from “An econometric model of the United Kingdom” by Klein et al. (1961). One is based on the data after subtracting the average value of each quarter from respective series. In the second example the values of the variables are residuals from a simple Box‐Jenkins model of each series.

Date: 1977
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