The following table gives data on percent change per year for stock prices (Y) and consumer prices (X) for a cross section of 20 countries.
a. Plot the data in a scattergram.
b. Regress Y on X and examine the residuals from this regression. What do you observe?
c. Since the data for Chile seem atypical (outlier?), repeat the regression in (b), dropping the data on Chile. Now examine the residuals from this regression. What do you observe?
d. If on the basis of the results in (b) you conclude that there was heteroscedasticity in error variance but on the basis of the results in (c) you reverse your conclusion, what general conclusions do you draw?