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Firstly, it is imperative that I investigate the stochastic properties of each series considered in the model prior to estimating the effects of oil price shocks on macroeconomic activity. This is done by analysing the order of integration from using a unit root test. Specifically, in this project the Augmented Dicky-Fuller (ADF) test will be used.Asteriou & Hall (2011) write the three different types of ADF equations as;
Where Yt = each variable (GDP, Inflation, Interest rates, Exchange rates, Unemployment and Oil prices.)
The difference between each equation is the appearance of and respectively. These are deterministic elements, noted as the constant and trend respectively.
For this test, the hypotheses are stated as;
The null hypothesis, infers that a unit root exists, whereas the alternative hypothesis, infers that there is no root. Once this test has been passed, an appropriate lag length will need to be determined for the VAR model. If any variable does not pass this test and contains a unit root, then it will be invalid and will not be analysed in the further stages.
1. Nations trade what they produce in excess of their own consumption to: A) generate jobs for the domestic economy. B) earn “good will” from the World Bank. C) prevent chronic sur
Use a diagram of the open economy model (e.g. fig 32.4 from the text) to illustrate and explain the effect of the following event on the market for loanable funds, the level of net
If population growth carry on then there will not be sufficient resources around for everyone this will lead to an event such as famine / war, which will decrease the population.
One of our clients is a major homebuilder in the Midwest. This company believes that sales of their new homes are highly correlated with business cycles in the overall US economy.
This 24 year 1 quarter period should offer sufficient insight into the short term and long term correlation between the variables. Figure - A graph showing the trend of
(Consumer Price Index)Given the following data, what was the value of the consumer price index in the base year? Calculate the annual rate of consumer price inflation in 2013 in ea
What are the Responsibilities of central banks Responsibilities include providing banking services to commercial banks and the government and regulating financial markets and i
Consider the following model of an economy that begins in a macro equilibrium,
explain the model
There are three firms in an economy: A, B, and C. Firm A buys $450 worth of goods from firm B and $260 worth of goods from firm C, and produces 260 units of output, which it sells
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