14 3 Using the same data as in Exercise 14 2, a researcher tests for a stochastic trend in ln(IPt), using the following regression where the standard errors shown in parentheses are computed using the homoskedasticity only formula and the regressor t is a linear time trend a Use the ADF statistic t...

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14.3. Using the same data as in Exercise 14.2, a researcher tests for a stochastic trend in...

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14.3. Using the same data as in Exercise 14.2, a researcher tests for a stochastic trend in ln(IPt), using the following regression:

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where the standard errors shown in parentheses are computed using the homoskedasticity-only formula and the regressor t is a linear time trend.

a. Use the ADF statistic to test for a stochastic trend (unit root) in ln(IP).

b. Do these results support the specification used in Exercise 14.2?
Explain.

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Introduction To Econometrics

ISBN: 9781292071367

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Authors: James Stock, Mark Watson

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Question Posted: Oct 26, 2024 01:00 AM

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14.3. Using the same data as in Exercise 14.2, a researcher tests for a stochastic trend in...

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Aln(IP) = 0.030 +0.000014t 0.0085 In(IP-1) + 0.050Aln(IP-1) (0.015) (0.000009) (0.0044) (0.053) (0.053) (0.054) (0.054) +0.186 Aln(IP-2) + 0.240Aln(IP-3) + 0.173Aln(IP-4),

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Introduction To Econometrics

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