Question: 18.6 Using the monthly data in VOLAT.RAW, the following model pcip 1.54.344 pcip+.074 pcip-2+.073 pcip (.56) (.042) (.045) (.042) n = 554, R = .174,

18.6 Using the monthly data in VOLAT.RAW, the following model pcip 1.54.344 pcip+.074 pcip-2+.073 pcip (.56) (.042) (.045) (.042) n = 554, R = .174, R2 = .168, where pcip is the percentage change in monthly industrial production, at an annualized rate, and pcsp is the percentage change in the Standard & Poor's 500 Index, also at an annualized rate. Den and Count on LEARNING Four the (i) If the past three months of pcip are zero and pcsp-1 = 0, what is the pre- dicted growth in industrial production for this month? Is it statistically different from zero? (ii) If the past three months of pcip are zero but pcsp = 10, what is the predicted growth in industrial production? (iii) What do you conclude about the effects of the stock market on real eco- nomic activity?

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