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1. The data we use in this part is annual data. Use the following commands to define the variable as annual data: tSSEt year Then

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1. The data we use in this part is annual data. Use the following commands to define the variable as annual data: tSSEt year Then draw a graph of manufacturing production (MANValAdded) over time. Calculate the real manufacturing by dividing the nominal values by the price index 0. Draw the graph of real manufacturing over time. Calculate the natural log of real manufacturing value added. Draw the graph over time. Copy and paste the graphs below and compare them. Then discuss the possibility of non-stationarity in the data. 2. Design and run a regression that discovers the existence of a linear time trend in the log data. Copy and paste the results below and explain. Calculate the predicted values and the residuals. Draw the data and the fitted lien in one graph and the residual in another graph. Copy and paste the graphs below. 3. The residual from the above regression is the "detrended data" we would like to work on to build a model (you can call it y and rename it to y if you like). Run an AR(1) model on y (run a regression of y on the first lag of y. The first lag of y in Stata is shown by L1.y}. Copy and paste the regression results below. Interpret the results. Is the past a significant factor is explain the data? 4. Run a model with the first and second lag (L2.y). Run another model with the rst, and second and third lag (L3.y). Compare these two models with the model in the previous question. How many lags seems appropriate? Explain. Copy and paste the regression results below (you may create a table containing the three models and use it.) 5. We like to draw the ACF and PACF of the data. Use the command congrarn with the name of your variable (y). Copy and paste the results below. Explain the ACF and PACF and compare them with Figures 11.6 and 11.7 in the lecture notes. Is there any evidence for AR model? How many lags is appropriate? Explain. 6. Find the annual growth rate of manufacturing real value index (MANReallnd), real import, and real export (Epreal and lmpReal). [Use the formula: (new-old)*100lold, where old is the first lag of the variable] Run a regression of manufacturing growth rate on export growth rate. Draw the scatter graph and fitted line. Copy and paste the graph below. It should look like Figure 10 in the paper. Explain if export growth is an important factor for manufacturing growth. Do the results support the theory the authors suggest? 7. Run a regression of manufacturing growth rate on import growth rate. Draw the scatter graph and fitted line. Copy and paste the graph below. It should look like Figure 13 in the paper. Explain if import growth is an important factor for manufacturing growth. Do the results support the theory the authors suggest

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