Use the data in PHILLIPS.RAW to answer these questions.
(i) Using the entire data set, estimate the static Phillips curve equation inft = (0 + (1 unemt + ut by OLS and report the results in the usual form.
(ii) Obtain the OLS residuals from part (i), t, and obtain ( from the regression 1 on 1-t. (It is fine to include an intercept in this regression.) Is there strong evidence of serial correlation?
(iii) Now estimate the static Phillips curve model by iterative Prais-Winsten. Compare the estimate of (1 with that obtained in Table 12.2. Is there much difference in the estimate when the later years are added?
(iv) Rather than using Prais-Winsten, use iterative Cochrane-Orcutt. How similar are the final estimates of (? How similar are the PW and CO estimates of (1?