The dataset contains data from 1956 to 1990 on the natural logarithm of real GDP (ly), and the natural logarithm of real consumers' expenditure (lc) in the USA. Using the skills and knowledge acquired in this module, estimate, explain and interpret the Restricted and the Unrestricted Error Correction Mechanism models of the relationship between lc and ly. Which of these models do you prefer and why?

 

year      lc           ly
1950 13.6128 14.0881
1951 13.6255 14.1629
1952 13.6507 14.1993
1953 13.6884 14.2475
1954 13.7056 14.2257
1955 13.7752 14.2922
1956 13.8035 14.3137
1957 13.8245 14.3323
1958 13.8346 14.3275
1959 13.8874 14.3857
1960 13.9105 14.4059
1961 13.9301 14.4337
1962 13.9728 14.4847
1963 14.009 14.5266
1964 14.0642 14.5835
1965 14.1195 14.6412
1966 14.1687 14.691
1967 14.1974 14.7135
1968 14.2474 14.7544
1969 14.2824 14.7826
1970 14.3062 14.7816
1971 14.3384 14.8136
1972 14.4012 14.863
1973 14.4427 14.9096
1974 14.4314 14.9021
1975 14.4526 14.8918
1976 14.5062 14.9394
1977 14.5498 14.9829
1978 14.5898 15.0328
1979 14.6113 15.0524
1980 14.6087 15.0516
1981 14.6241 15.074
1982 14.6348 15.0479
1983 14.684 15.0861
1984 14.7312 15.1553
1985 14.7771 15.1923
1986 14.8168 15.2237
1987 14.8442 15.2583
1988 14.8805 15.3027
1989 14.9006 15.3301
1990 14.9099 15.3393