Question: For the data in Table 4.10: (a) Estimate a regression of HS on y and RR. (b) Estimate a VAR model with one lag. Compute

For the data in Table 4.10:

(a) Estimate a regression of HS on y and RR.

(b) Estimate a VAR model with one lag. Compute the characteristic roots. Test for cointegra- tion and estimate the cointegrating vectors, if any.

(c) What sense can you make of the multiple regression estimated in part (a)?

(d) Repeat the analysis with residuals from a regression of the raw data on quarterly dummies.

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