Introductory Econometrics: A Modern Approach 6th Edition by Jeffrey M Wooldridge

Exercise 18

Consider the model estimated in (10.15); use the data in INTDEF.RAW.

(i) Find the correlation between inf and def over this sample period and comment.

(ii) Add a single lag of inf and def to the equation and report the results in the usual form.

(iii) Compare the estimated LRP for the effect of inflation with that in equation (10.15). Are they vastly different?

Step 1 of 4

(i)

The correlation between and for the data for the period 1948-2003 can be estimated using CORREL () function in excel.

It is discovered to be 0.09747