Now we need to find our X variables. In our model we only have two X variables, which are X2t, disposable personal income (DPI) and X3t, the prime rate. We see that DPI is in the column marked DPI (X2) which is in Column D, in cells D2-D180 and the prime rate is in the column marked Prime Rate (X3) which is in column E, in cells E2-E180. We've identified the data we need. We can now compute the regression coefficients using Excel. If you are not restricted to using a particular program for your regression analysis, I'd recommend using Excel. Excel is missing a lot of the features a lot of the more sophisticated econometrics packages use, but for doing a simple linear regression it is a useful tool. You're much more likely to use Excel when you enter the "real world" than you are to use an econometrics package, so being proficient in Excel is a useful skill to have.
Our Yt data is in cells E2-E180 and our Xt data (X2t and X3t collectively) is in cells D2-E180. When doing a linear regression we need every Yt to have exactly one associated X2t and one associated X3t and so on. In this case we have the same number of Yt, X2t, and X3t entries, so we're good to go. Now that we have located the data we need, we can calculate our regression coefficients (our b1, b2, and b3). Before continuing you should save your work under a different filename (I chose myproj.xls) so if we need to start over we have our original data.
Now that you've downloaded the data and opened Excel, we can go onto the next section. In the next section we calculate our regression coefficients.
Be Sure to Continue to Page 3 of "How to Do a Painless Multivariate Econometrics Project"
