[15 points] Suppose the two time series y, and zt, are determined by the following reduced . form system, -- -) 1 0.5 0.2 1 elt + and 0.8 0.2 Eyt 0.5&t. [*]-[.8 .6 03 0644 0 where, Eyt and Ezt are fundamental shocks for y, and zt, respectively. (1) Suppose this is the correct model, that is there is no serial correlation in en and e2, respectively, and the standard error for 12 and are 21 are 0.08 and 0.18, respectively, test the Granger causality of z for y. (2) If the last observations are y60 =1.2 and z60 = 2, what is your predicted value of y60(2)? (3) In order to be consistent with the Sim's approach, what is the structure VAR form for this system? (4) Compute the first two impulse response of y, to a one-unit shock in &-t. [15 points] Suppose the two time series y, and zt, are determined by the following reduced . form system, -- -) 1 0.5 0.2 1 elt + and 0.8 0.2 Eyt 0.5&t. [*]-[.8 .6 03 0644 0 where, Eyt and Ezt are fundamental shocks for y, and zt, respectively. (1) Suppose this is the correct model, that is there is no serial correlation in en and e2, respectively, and the standard error for 12 and are 21 are 0.08 and 0.18, respectively, test the Granger causality of z for y. (2) If the last observations are y60 =1.2 and z60 = 2, what is your predicted value of y60(2)? (3) In order to be consistent with the Sim's approach, what is the structure VAR form for this system? (4) Compute the first two impulse response of y, to a one-unit shock in &-t