[15 points] Suppose the two time series y, and zt, are determined by the following reduced...
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[15 points] Suppose the two time series y, and zt, are determined by the following reduced form system, 1 05 02 1 elt and [es] - [0.8 0.8 0.2&t 0.5&t .6 03 0641 where, Eyt and Et are fundamental shocks for y, and zt, respectively. (1) Suppose this is the correct model, that is there is no serial correlation in ei 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 Y60(2)? = 2, what is your predicted value of (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 05 02 1 elt and [es] - [0.8 0.8 0.2&t 0.5&t .6 03 0641 where, Eyt and Et are fundamental shocks for y, and zt, respectively. (1) Suppose this is the correct model, that is there is no serial correlation in ei 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 Y60(2)? = 2, what is your predicted value of (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.
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