DATA: COMMENT SECTION

The 'house price' data set has three variables:

? 'house': the growth rate in percentage of real price of houses in Sydney. For example, an observation of 2 would mean that house price has increased by 2% over the time period.

? 'gdp': the growth rate in percentage of Australian real gdp per capita

? 'interest': the growth rate in percentage of the real interest rate that is represented by the yield of 10-year Australian government bonds.

REQUIREMENT:Deliver a REPORT answering below questions (analyze and make comment)

IMPORTANT: **PLEASE, UPLOAD EXCEL FULLCALCULATION FILE** It is often suspected that house prices depend on economic conditions and this question seeks to provide quantitative evidence to address such suspicion. This question uses all the three variables provided in the 'house price' data set.

a) From the provided data, construct four lag variables (lag 1 quarter, lag 2 quarters,..., lag 4 quarters) for variable gdp and variable interest. Note that if lag variables are correctly constructed for gdp, they would look as follow: