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In order to observe the correlations between each variable, the most effective method to use is Vector Autoregression (VAR). VAR estimation uses a system of simultaneous equations to observe interdependencies throughout multiple time-series data.
The VAR is unrestricted; it will produce a theory-free estimation of economic relationships. It is imperative to understand that the estimation will not test any economic theories, nor will it analyse any government policies such as inflation targeting. The VAR will purely estimate the correlations between the specified macroeconomic variables over the time period. This paper's empirical set-up is largely borrowed from Jiménez-Rodríguez, R. and Sánchez, M. (2004) as their study was very similar to this paper, but focuses onseveral OECD countries, not just the UK. The borrowed methodology is using an unconstrained vector autoregression which is then transformed into its Moving Average Representation form in order to estimate the impulse response functions. The following vector autoregression of order p, where p is the number of lags is estimated;
Where, = GDP, = Oil Prices, = Inflation rate, = Interest Rate, = Unemployment rate and = Real exchange rate. Finally, is the error term for each equation.
discuss.
When single business or corporation dominates its area and squeezes out all its competition, the result is the consumer does not have a open choice, and inevitably, the price of it
a good is classified as inferior if a. consumers buy less when the price rises b. consumers buy less when the income rises c. consumers buy less when the price falls d.
Beverly enterprises owns a nursing home that is currently earning $2.0 million in cash flow on an annual basis, but this amount is expected to drop in the future. The nursing home
What is Frictional unemployment Individuals who are temporarily unemployed when transiting between jobs or just entering labour market. This kind is typically short in durat
Explain why we cannot measure the national product simply by adding up the production of all firms. Why do the economists use real GDP rather than nominal GDP to gauge economic
In order to estimate the VAR, I have firstly to specify the data which will be analysed. As it is my aim to observe the correlations between oil prices and key macroeconomic variab
How can a country maintain equilibrium GDP with foreign trade?
Which of the following will decrease the nominal deficit? A. An increase in taxes. B. An increase in the debt. C. An increase in government expenditures. D. An increase in interest
what is credit multiplier?
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