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problem set answers - Economics 467: Economic Forecasting...

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Economics 467: Economic Forecasting Department of Economics State University of New York at Binghamton Problem Set #1 — Answers (Linear Regression) 1. (a) Neither f gure appears to have a constant mean or variance. (b) They appear to move together. In general, the one-year rate is greater than the three-month rate, as expected. (c) d TB 1 yr t =0 . 698 (0 . 067) +0 . 916 (0 . 010) TB 3 mo t (d) The positive coe cient near one tells us that long-run and short-run rates move in the same direction. It also tells us that a one-unit increase in the short term rate is followed by a one-unit increase in the long term rate. (e) t = 0 . 916 1 0 . 010 = 8 . 4 we reject the null that β =1 (f) We not observe any particular pattern. (g) The F -statistic for the test with no cross-equation restrictions is 19.020 with a p -value equal to 0.000. Therefore we reject the null of homoskedasticity. (h) d TB 1 yr t =0 . 698 (0 . 088) +0 . 916 (0 . 017) TB 3 mo t (i) We see that both standard errors increase and that the coe cients do not change (as is the case for any data set). Recall that only the standard errors change when using robust standard errors after OLS regression. (j) d TB 1 yr t =0 . 556 (0 . 081) +0 . 945 (0 . 014) TB 3 mo t 0 . 444 (0 . 152) D t (k) t = 0 . 444 0 0 . 152 = 2 . 931 and the p -value is 0 . 004 we reject the null that the dummy variable is irrelevant (l) The f there( intermso f R 2 ) is raised to 0 . 981 from 0 . 979 . We also see decreases in AIC and SC
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Economics 467: Economic Forecasting Department of Economics State University of New York at Binghamton Problem Set #2 — Answers (ARMA models) 1. (a) The mean does not appear to be constant over time, but the variance appears to be constant. (b) There is geometric decay in the ACF and a single signi f cant spike in the PACF. (c)
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problem set answers - Economics 467: Economic Forecasting...

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