(a) Estimate a model of the federal funds rate, controlling for whether the president was a Democrat, the number of quarters from the last election, an interaction of the Democrat dummy variable and the number of quarters from the last election, and inflation. Use a plot and an auxiliary regression to assess whether there is first-order autocorrelation.

(b) Estimate the model from part

(a) with Newey-West standard errors. Compare the coefficients and standard errors to those produced by a standard OLS model.

(c) Estimate the model from part

(a) by using the \(ho\)-transformation approach, and interpret the coefficients.

(d) Estimate the model from part (a), but add a variable for the lagged value of the federal funds rate. Interpret the results, and use a plot and an auxiliary regression to assess whether there is first-order autocorrelation.

(e) Estimate the model from part

(c) with the lagged dependent variable. Use the \(ho\)-transformation approach, and interpret the coefficients.