Figure 4 shows monthly observations on the natural log of lightweight vehicle sales, ln (Sales t), for the period January 1992 to December 2000.
FIGURE 4 Lightweight Vehicle Sales

A. Using the figure, comment on whether the specification ln (Sales t) = b0 + b1[ln (Sales t ˆ’1)] + ε t is appropriate.
B. State an appropriate transformation of the time series.

Transcribed Image Text:

3.00 2.90 2.80 2.70 2.60 2.50 2.40 2.30 2.20 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year In (Millions of Units) (Annualized)