11.7 A computer will be needed to solve this and the next Problem.

(a) Repeat the regression equation from Problem 11.5 but add three seasonal dummy variables (for quarters 2, 3 and 4) to the regressors. (The dummy for quarter 2 takes the value 1 in Q2, 0 in the other quarters. The Q3 dummy takes the value 1 in Q3, 0 otherwise, etc.) How does this affect the coefficients on the time trend variables? (Use data for 2000 – 2006 only).

(b) How do the t-ratios on the time coefficients compare with the values found in Problem 11.5? Account for the difference.

(c) Compare the coefficients on the seasonal dummy variables with the seasonal factors found in Problem 11.5 (d). Comment on your results.