Increases in oil prices have been blamed for several recessions in developed countries. To quantify the effect
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a. Suppose that oil prices jump 25% above their previous peak value and stay at this new higher level (so that Ot = 25 and Ot+1 = Ot+2 = ... = 0). What is the predicted effect on output growth for each quarter over the next 2 years?
b. Construct a 95% confidence interval for your answers in (a).
c. What is the predicted cumulative change in GDP growth over eight quarters?
d. The HAC F-statistic testing whether the coefficients on Ot and its lags are zero is 3.49. Are the coefficients significantly different from zero?
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a See the table below b i is the dynamic multiplier With the 25 oil price jump the predicted effect ...View the full answer
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Related Book For 
Introduction to Econometrics
ISBN: 978-0133595420
3rd edition
Authors: James H. Stock, Mark W. Watson
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