Where d p is domestic price level , f p is foreign price level, d i is domestic
ID: 3124946 • Letter: W
Question
Where d p is domestic price level , f p is foreign price level, d i is domestic interest rate,
a is a constant and e is the error term.
a. State the general regression representation for time series and panel analysis
b. State the Autoregressive Distributed Lags (ARDL(1, 0, 0,2)) representations
for each of the time series and panel regressions stated in 3(i) above.
c. Write the error correction model for the time series representation in 3(i) and
explain all the terms.
d. Explain how you will implement Engle and Granger cointegration for time
series models.
Explanation / Answer
solutions:
Time series data. Many observations (large t ) on as few as one unit (small N ).
Examples: stock price trends, aggregate national statistics
Panel data: Two or more observations (small t) on many units (large N).
o Panel surveys of households and individuals (PSID, NLSY, ANES )
o Data on organizations and firms at different time points
o Aggregated regional data over time
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