Q1. This question uses the data on unemployment.
(a) What is meant by a stationary time series and why is it important?
(b) Graph each time series and comment on whether you think it is stationary.
(c) Determine whether each time series is stationary.
(d) Determine whether unemployment and the help wanted index are cointegrated.
(e) Estimate the error correction model for this relationship and comment on the results.
Q2. Consider the following gasoline demand function:
lnYit = B1 + B2 lnX2it + B3 lnX3it + B4 lnX4it + uit
where Y is gasoline consumption per car, X2 is real income per capita, X3 is real gasoline price, X4 is the number of cars per capital, i is the country code in all 18 OECD countries, and t is time (annual observations from 1960 - 1978).
Using the data provide:
(a) Estimate the demand function pooling the data.
(b) Estimate a fixed effects model using the same data.
(c) Estimate a random effects model using the same data.
(d) Comment on which model best describes the gasoline demand.
Attachment:- Assignment Data.rar