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

Exercise 3

On the textbook Web site Mww.pearsonhighered.coni/stock_watson, you will find a data file USMacro_Quarterly that contains quarterly data on several macroeconomic series for the United States; the data are described in the file USMacro_Description. Compute Y t = ln( GDP t ; ) , the logarithm of real GDP, and Y t the quarterly growth rate of GDP. In Empirical Exercises 14.1 through 14.6, use the sample period 1955:1-2009:4 (where data before 1955 may be used, as necessary, as initial values for lags in regressions).
a. Estimate an AR(1) model for A Y,. What is the estimated AR(1) coefficient Is the coefficient statistically significantly different from zero Construct a 95% confidence interval for the population AR(1) coefficient.
b. Estimate an AR(2) model for Y t. Is the AR(2) coefficient statistically significantly different from zero Is this model preferred to the AR(1) model
c. Estimate AR(3) and AR(4) models. (/) Using the estimated AR(1) through AR(4) models, use BIC to choose the number of lags in the AR model, (ii) How many lags does AIC choose