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: Finding long-run equilibrium relationships between non-stationary variables. A slide deck is just theory
Understanding the relationship between a dependent variable and one or more explanatory variables . Gujarati emphasizes that correlation does not equal causation.
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Solving the issue of correlated error terms over time (common in time-series data).
Here, ( Y_i ) is the actual data point, ( \hat\beta_1 ) and ( \hat\beta_2 ) are our estimated coefficients, and ( \hatu_i ) is the (the error between the actual point and our estimated line).