Question: Continue with the data given in Table 17.5. Now consider the following simple model of money demand in Canada: ln M 1t = 1

Continue with the data given in Table 17.5. Now consider the following simple model of money demand in Canada:

ln M1t = β1 + β2 lnGDPt + β3 ln Rt + ut

a. How would you interpret the parameters of this model?

b. Obtain the residuals from this model and find out if there is any ARCH effect.

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