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An Eviews workfile containing the data for Question 2 has been uploaded to the Assignments folder on Moodle. The file is called Data_Assignment_2_Q2. The data
An Eviews workfile containing the data for Question 2 has been uploaded to the Assignments folder on Moodle. The file is called Data_Assignment_2_Q2. The data set contains annual observations on the rate of inflation, inf, and the rate of monetary growth, mg, for Norway for the years 1900 to 2015 inclusive. The sample means of the variables are: inf mg 3.628229 7.039439 EViews - [Equation: UNTITLED Workfile: ASS_2_Q2_2410_STUDENTS (1)::Norway_macro\\] File Edit Object View Proc Quick Options Add-ins Window Help X Command Command Explorer Command Capture View Proc Object Print Name Freeze Estimate Forecast Stats Resids Dependent Variable: INF Method: Least Squares Date: 10/10/21 Time: 00:12 Sample (adjusted): 1901 2015 Included observations: 115 after adjustments Variable Coefficient Std. Error t-Statistic Prob C 1.411673 0.547321 2.579242 0.0112 INF(-1) 0.607500 0.074748 8.127325 0.0000 R-squared 0.368903 dependent var 3.623629 Adjusted R-squared 0.363318 S.D. dependent var 6.381890 S.E. of regression 5.092259 Akaike info criterion 6.110558 Sum squared resid 2930.214 Schwarz criterion 6. 158296 Log likelihood -349.3571 Hannan-Quinn criter. 6.129935 F-statistic 66.05341 Durbin-Watson stat 1.942094 Prob(F-statistic) 0.000000 Path = \\\\ad.monash.edu\\home\\user055\\ dzou0007\\documents DB = none WF = ass_2_q2_2410_students (1) (a) Do you agree with the statement that inf is a white noise process? Briefly explain. (2 marks) (b) i) Estimate the linear regression equation inf, = Bo + Blinfi-1 + ut. (2) Report the estimated equation in equation form in the main body of your assignment. Report the estimated coefficients and standard errors to three decimal places. Place the Eviews output in Appendix 2(b). (2 marks) ii) Conduct some informal analysis to determine whether or not there is any evidence of autocorrelation in the error term in (2). (2 marks) iii) Let U1 = Pilli-1 + P2li-2 + er. (3) Perform a Breusch-Godfrey test of the null hypothesis that there is no first-order or second-order autocorrelation in the error term in (2). State the null and alternative hypotheses, the form and distribution of the test statistic under the null, the sample value and critical value of the test statistic, your decision rule and your conclusion. (Use the R form of the test)
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