Introduction to Econometrics 3rd Edition by James Stock, Mark Watson

تمرين 5

Using the same data as in Exercise 14.2, a researcher tests for a stochastic trend in In (IP t ) using the following regression:
where the standard errors shown in parentheses are computed using the homoskedasticity-only formula and the regressor "t" is a linear time trend.
a. Use the ADF statistic to test for a stochastic trend (unit root) in In (IP).
b. Do these results support the specification used in Exercise 14.2 Explain.