(i) Add a linear time trend to equation (11.27). Is a time trend necessary in the first-difference equation?
(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.