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2. The goal of this exercise is to estimate Okun's law using data from the Federal Reserve. Download the following timeseries from FRED:1 (C) (d)
2. The goal of this exercise is to estimate Okun's law using data from the Federal Reserve. Download the following timeseries from FRED:1 (C) (d) The civilian unemployment rate (UNRATENSA): U. The natural rate of unemployment (NROU): U N. Real gross domestic product (GDPCl): Y. Real potential gross domestic product (GDPPOT): YP. From these time series calculate and plot the unemployment gap, U U N, and the output gap 100 X (Y YP)/YP as a function of time (and on a quarterly basis) from the rst quarter of 1949 to the most recent data available. Your graph should look similar to the graph on slide 18 of lecture 10. Create a scatter plot of the unemployment gap as a function of the output gap. Your graph should look similar to the graph on slide 19 of lecture 10. Note: you'll need to extend the acres shown in class to get the most recent data point onto the graph. Perform a linear regression on the data in the graph you generated for Question (2b) and show the regression result as a line on your graph. (Note: The regression method you used in the analysis of the Cobb-Douglas data can be used here.) Does your regression analysis support the equation for Okun's Law discussed in class? Why
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