<p>The coefficient for lnpuc is the effect of lnpuc when d79 = 0. This coefficient is -0.324.  The coefficient of d79lnpuc measures the change in the effect of lnpus when d79  = 1, thus the effect of lnpuc when d79 = 1 is -0.324 + 0.274 &lt; 0.</p>

CC BY-SA 4.0
2021-11-27T21:00:21.860Z
Yes, I understand that. I do not understand why it has a positive coefficient and how to interpret that.
John Doe
CC BY-SA 4.0
2021-11-28T12:35:49.637Z
It means that when d79 the effect is not as negative compared to when d79 = 0.
Michael Gmeiner
CC BY-SA 4.0
2021-11-27T20:54:18.990Z
2021-11-27T20:54:18.990Z
Michael Gmeiner
<p>I have the following regression, where I regress the consumption of gasoline on logarithmic variables.</p>
<p><a href="https://i.sstatic.net/RxMzM.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/RxMzM.png" alt="enter image description here" /></a></p>
<p>Meaning of the variables is:
pnc=price index for cars
pg=price index for gasoline, puc=price index for old cars
y=per capita disposable income, ppt=price index for public transportation
pd=price index for consumer durables,
d79=time dummy for the OPEC oil shock, 1 for the post-1979 period and 0 otherwise</p>
<p>I do not understand how to interpret d79lnpuc variable. Why after the 1979 crisis an increase in the price of old cars has a positive relation to the consumption of gasoline? I think that maybe people started to buy old cars, because of the increase in the price of gasoline. However, I do not see any connection with that and d79lnpuc having a positive coefficient.</p>
<p>I will be thankful for any suggestions and hints.</p>

<microeconomics><econometrics><mathematical-economics><price>
Interpretation of an Interactive Dummy variable
John Doe
# Interpretation of an Interactive Dummy variable

(Asked by: username_0 on 2021-11-27)

I have the following regression, where I regress the consumption of gasoline on logarithmic variables.

[![enter image description here](https://i.sstatic.net/RxMzM.png)](https://i.sstatic.net/RxMzM.png)

Meaning of the variables is:
pnc=price index for cars
pg=price index for gasoline, puc=price index for old cars
y=per capita disposable income, ppt=price index for public transportation
pd=price index for consumer durables,
d79=time dummy for the OPEC oil shock, 1 for the post-1979 period and 0 otherwise

I do not understand how to interpret d79lnpuc variable. Why after the 1979 crisis an increase in the price of old cars has a positive relation to the consumption of gasoline? I think that maybe people started to buy old cars, because of the increase in the price of gasoline. However, I do not see any connection with that and d79lnpuc having a positive coefficient.

I will be thankful for any suggestions and hints.

**Tags:** microeconomics, econometrics, mathematical-economics, price


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## 1 answers

### Answer by username_1 on 2021-11-27. Score: 1

The coefficient for lnpuc is the effect of lnpuc when d79 = 0. This coefficient is -0.324. The coefficient of d79lnpuc measures the change in the effect of lnpus when d79 = 1, thus the effect of lnpuc when d79 = 1 is -0.324 + 0.274 < 0.

> **Comments:**
> **username_0**: Yes, I understand that. I do not understand why it has a positive coefficient and how to interpret that.  
> **username_1**: It means that when d79 the effect is not as negative compared to when d79 = 0.  

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