(i) Add a linear time trend to equation (11.27). Is a time trend necessary in the first-difference equation? (ii) Drop...
(ii) Drop the time trend and add the variables ww2 and pill to (11.27) (do not difference these dummy variables). Are these variables jointly significant at the 5% level?
(iii) Using the model from part (ii), estimate the LRP and obtain its standard error. Compare this to (10.19), where gfr and pe appeared in levels rather than in first differences.
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Question Posted: April 21, 2016 04:55:49