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Assume that you would like to determine the causality between money supply (M2) of USA and the Federal funds rate (FFR). You have downloaded the
Assume that you would like to determine the causality between money supply (M2) of USA and the Federal funds rate (FFR). You have downloaded the data for the sample period from 1990 to 2020. The data frequency is annually. Use subscript t to represent a specific year. Please design a VAR model using 1 lag to test the causality between M2 and FFR (i.e., whether M2 causes FFR, or the other way round). Then discuss how you will analyze your results (i.e., discuss the significance of coefficients and causality). Note: you have to write down your full model with correct subscripts (t)
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