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Before seeking possible insight from the data, let's go through the process of checking for a unit root. Refer to page 545 in the Stock
Before seeking possible insight from the data, let's go through the process of checking for a unit root. Refer to page 545 in the Stock and Watson textbook. First, take note of a potentially confusing typo. The third text row under equation 15.32 starts with = 0. That should be = 0. Second, go through the motions of writing, or typing, below the version of equation 15.32 that would apply for an AR(4) model. Which statistic related to the equation is the augmented Dickey Fuller statistic? What is the null hypothesis? Mention the words "unit root", "stationary" and "stochastic" in your description of the null hypothesis
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