Consider the empirical example in section 5.6, based on the Consumption-Income data in Table 5.3. Obtain this data set from the CONSUMP.DAT file on the Springer web site.

(a) Replicate the OLS regression of Ct on Yt and a constant, and compute the Durbin-Watson statistic. Test H0; ρ = 0 versus H1;ρ > 0 at the 5% significance level.

(b) Perform the Cochrane-Orcutt procedure and verify the regression results in the text.

(c) Perform the two-step Prais-Winsten procedure and verify the regression results in the text.
Iterate on the Prais-Winsten procedure.

(d) Perform the maximum likelihood procedure and verify the results in the text.

(e) Perform Durbin’s regression and verify the results in the text.

(f) Test for first-order serial correlation using the Breusch and Godfrey test.
(g) Compute the Newey-West heteroskedasticity and autocorrelation-consistent standard errors for the least squares estimates in part (a).