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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.
Can growth arise without development? Growth is just one feature of development and therefore is an essential but not enough condition for economic development. For example, g
Explain why P=MC in the short-run equilibrium of the perfectly competitive firm, whereas in the long-run equilibrium P=MC=AC.
what do we mean when we say export are exogenous and import are endogeneos?
Q. Overnight rates and interest rates with longer maturity? By controlling overnight interest rates, central bank will affect interest rates with longer maturity. Main reason f
Inflation (RPI) - another imperative channel. Oil is a necessity for the UK, and is price inelastic therefore one can analyse the correlation between a price shock and inflation. I
The aim of this paper is to observe and interpret the correlations between oil price changes, and changes to key macroeconomic indicators. From this we will be able to observe if t
One problem in using exchange rate when comparing GDP per capital between countries is that is fluctuates a lot. A way of avoiding dependence on exchange rate is to use purchasing
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