The data file var.dat contains 100 observations on two generated series of data, w and z. The variables are nonstationary but not cointegrated. Estimate a VAR model of changes in the variables. As a check, the results are (the intercept terms were not significant):

Db wt ¼ 0:743Dwt1 þ 0:214Dzt1

ðtÞ ð11:403Þ ð2:893Þ

Dbzt ¼ 0:155Dwt1 þ 0:641Dzt1

ðtÞ ð2:293Þ ð8:338Þ

(a) The residuals from the VAR model should not be autocorrelated. Is this the case?

(b) Determine the impulse responses for the first two periods. (You may assume the special condition that there is no contemporaneous dependence.)

(c) Determine the variance decompositions for the first two periods.