Mechanics of Dummy Variables in Trend Lines

This explores the construction and use of dummy variables in detail. After identifying the dangers of the "dummy variable trap" it describes and illustrates the construction and use of intercept and slope dummy variables in regression trend lines. It also discusses so called "jack-knife" or "piece-wise" regression estimation.

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TOPIC CATEGORY:  Tricks with Time Trends

KEYWORDS: 
Dummy Variables, Dummy Variable Trap, Intercept Dummy, Slope Dummy, Jack-Knife, Piece-Wise

RUN TIME: 
9:42

AUTHOR /PRESENTER: 
Steve Crane, Department of Economics

PRIMARY DISCIPLINE: 
Econometrics/Statistics

RELATED DISCIPLINES: 
- -

SKILLS DELIVERED: 
Understanding and ability to explain the construction and use of intercept and slope dummy variables in regression trend lines. Understanding of the "dummy variable trap" and the so called "jack-knife" or "piece-wise" regression estimation procedures.

RIGOR LEVEL: 
4000

PREREQUISITE INFO: 
Intro to Simple Curve Fitting, Seasonal Adjustment, and Conceptual Dummy Variable Videos