Question: 7. Using monthly observationso n changesi n the U.S. index of industrialp roduction (DIP) for the period January 1985 to December 2005, the following autoregressive

7. Using monthly observationso n changesi n the U.S. index of industrialp roduction

(DIP) for the period January 1985 to December 2005, the following autoregressive model was estimated 5D, :0.109 + 0.033DIPt,t + 0.236DIPFz -t 0.200D1P,-3 o" :0.4293

(a) Uset his estimatede quationt o forecastD IP for JanuaryF, ebruary,a ndM arch 2006.

(Values for October, November and December, 2005, are DIPT-2: 1.221, DIPT-1: 1.006a ndD IPT: 1.041r, espectively.)

(b) Find 95Vo confidence intervals for your forecasts.

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