Instructions:

• You need to show and explain your work clearly. Copy an image of your excel works in the PDF as well.
• Make sure to write the name of all the group members on the top of your file.
• The Excel files with your work should also be submitted.
• No Email submission is accepted. The deadline is firm. Late assignments will not be graded.

In this exercise, we are going to continue working with the housing market data. Data in file "Housing_Market.xls" provides quarterly data of the number of housing starts in Texas from 1998 to 2011. Housing starts reflects the number of privately owned new houses on which construction has been started in a given period. The dataset includes information data on the unemployment rate, real gross state product (GSP), GSP growth, sales of lumber, sheet goods, and miscellaneous hardware. (55 points)

1. Create dummy variables for each quarter(5 points).Use a multiple regression model with the housing starts as the dependent variable and quarterly dummies as the independent variable(5 points). Does the data suggest any seasonal pattern?(5 points)

1. Use a multiple regression model with the housing starts as the dependent variable and Real GSP, Growth in GSP, Unemployment rate, sales of lumber, sales of sheet goods, and sales of miscellaneous hardware as the independent variables. (10 points) What variables are statistically significant predictors of the Housing starts?(5 points)What is their interpretation?(10 points)

1. Discuss whether the sign of the coefficients of the Unemployment rate and Real GSPmake sense? (For example, if the sign is positive, it suggests that an increase in the independent variable would increase housing starts. The question is whether such a positive relationship is what you would have expected?)(10 points)

1. Create a dummy variable (shock) that is equal to one, if the year is 2006 and forward and 0 otherwise.(5 points)

1. Now addshockto your model in part B.(5 points)Interpret the coefficient of shock.(5 points)

state	Year	Quarter	Unemployment rate	Housing starts	Real GSP	Growth in Real GSP	Sales of dimensional lumber	Sales of sheet goods	Sales of misc. hardware
TX	1998	1	4.97	22859	801462	6	143	67	82
TX	1998	2	4.90	24001	801462	6	145	67	78
TX	1998	3	5.00	25140	801462	6	151	71	86
TX	1998	4	4.90	25812	801462	6	155	77	99
TX	1999	1	4.70	25253	835845	4	158	79	92
TX	1999	2	4.73	24736	835845	4	157	76	79
TX	1999	3	4.80	25253	835845	4	161	81	89
TX	1999	4	4.67	24262	835845	4	165	85	106
TX	2000	1	4.57	27173	870111	4	173	81	101
TX	2000	2	4.47	25036	870111	4	176	84	116
TX	2000	3	4.30	26111	870111	4	177	79	97
TX	2000	4	4.20	27271	870111	4	183	86	109
TX	2001	1	4.30	27520	891618	2	186	92	112
TX	2001	2	4.73	27886	891618	2	185	95	109
TX	2001	3	5.23	26738	891618	2	191	85	111
TX	2001	4	5.80	27553	891618	2	191	93	99
TX	2002	1	6.20	28418	912837	2	198	91	112
TX	2002	2	6.37	30297	912837	2	202	93	125
TX	2002	3	6.40	30468	912837	2	204	97	120
TX	2002	4	6.53	31291	912837	2	205	93	116
TX	2003	1	6.67	30741	914892	0	205	96	121
TX	2003	2	6.83	31882	914892	0	206	93	117
TX	2003	3	6.80	35414	914892	0	210	112	127
TX	2003	4	6.50	33715	914892	0	215	98	116
TX	2004	1	6.23	35268	964924	5	216	103	127
TX	2004	2	6.07	35494	964924	5	218	108	114
TX	2004	3	5.93	35854	964924	5	217	108	119
TX	2004	4	5.83	35898	964924	5	221	105	136
TX	2005	1	5.60	37776	968553	0	228	110	139
TX	2005	2	5.40	39176	968553	0	233	116	140
TX	2005	3	5.30	41906	968553	0	239	122	140
TX	2005	4	5.20	45821	968553	0	242	112	134
TX	2006	1	5.10	43965	1016315	5	247	120	159
TX	2006	2	5.07	41509	1016315	5	242	119	143
TX	2006	3	4.90	37650	1016315	5	241	115	143
TX	2006	4	4.60	35797	1016315	5	235	116	133
TX	2007	1	4.40	33977	1071592	5	241	109	128
TX	2007	2	4.30	30134	1071592	5	242	120	146
TX	2007	3	4.30	27351	1071592	5	238	113	144
TX	2007	4	4.40	24693	1071592	5	232	114	127
TX	2008	1	4.37	22366	1077144	1	229	108	121
TX	2008	2	4.57	21449	1077144	1	230	106	140
TX	2008	3	5.07	18949	1077144	1	224	103	119
TX	2008	4	5.73	14586	1077144	1	208	86	105
TX	2009	1	6.57	13817	1057675	-2	191	80	105
TX	2009	2	7.37	15732	1057675	-2	193	85	110
TX	2009	3	7.93	18630	1057675	-2	199	93	101
TX	2009	4	8.13	18024	1057675	-2	193	88	83
TX	2010	1	8.20	18634	1113104	5	197	85	95
TX	2010	2	8.17	16717	1113104	5	195	88	92
TX	2010	3	8.13	14619	1113104	5	192	87	97
TX	2010	4	8.20	15265	1113104	5	185	82	98
TX	2011	1	8.03	14991	1149908	3	188	75	79
TX	2011	2	8.07	15584	1149908	3	188	85	86
TX	2011	3	8.03	16223	1149908	3	191	85	88
TX	2011	4	7.60	17201	1149908	3	196	90	100