Consider the following equation: Log(yt )= 0.7 + 1.2log(st ) + 0.3log(st-1) + 0.2log(st-2) + 0.1log(st-3) What is the percentage increase in y given a permanent 1% increase in s? a. 1.2 b. 1.8 c. 2.5 d. 0.5
From the given question, we will notice that the dependent variable, as well as the independent variable, are log-transformed in the model. Thus, a 1% increase in S will likely result in 1.2% increase in Y.
