Q1

(a) Consider the following time series model. What do you infer about the nature of the time series W? Y: = plYt_1 + at Where pt 2 3,l4 {3 Marks) (b) The following model of household credit (CRED) on real wages (W) is estimated for the state of New South Wales (NSW) using quarterly data over a period of 20010 to 2020, inows\" t) = 4.1534 + [11:159sz + c.c294wt_1 Using the following excerpt of the data, what is the predicted household credit in the third quarter of 201 8? Time Rea! Wae index m 201301 120.21 201802 120.52 201803 120.84 {4 Marks] {c} Suppose you are examining how exchange rate of Canadian dollars with US dollars (EX) is affected by oil price (GP) and Canadian domestic interest rates (H). You are particularly interested to test if there was any structural break in your model of exchange rate in 2001, the year of September 2001 twin tower attacks in the United States. You obtain annual data on the variables over the period 1980-2015 and estimate the following models for the entire sample and for the subsamples of 1980-2001 and 2002-2015: EX: : 181:1 + 31013: + )8th + \"1 Your calculated F statistic for the structural break test is given by F: 32. In View of the above information, answer the following questions: {i} If the unrestricted SSR is 270 and SSR of the estimated model of 1980-2001 is 100 then what is the SSR of the estimated model for the 2002-2015 period? {ii} What would you infer about the presence of structural break in the model of Canadian dollar exchange rate at the 10% level of signicance? {5 Marks]