Question: Consider the model estimated in (10.15); use the data in INTDEF. (i) Find the correlation between inf and def over this sample period and comment.

Consider the model estimated in (10.15); use the data in INTDEF.

(i) Find the correlation between inf and def over this sample period and comment.

(ii) Add a single lag of inf and def to the equation and report the results in the usual form.

(iii) Compare the estimated LRP for the effect of inflation with that in equation (10.15). Are they vastly different?

(iv) Are the two lags in the model jointly significant at the 5% level?

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