Question: Use the data in INVEN for this exercise; see also Computer Exercise C6 in Chapter 11. (i) Obtain the OLS residuals from the accelerator model

Use the data in INVEN for this exercise; see also Computer Exercise C6 in Chapter 11.

(i) Obtain the OLS residuals from the accelerator model Dinvent 5 b0 1 b1DGDPt 1 ut and use the regression u^t on u^t21 to test for serial correlation. What is the estimate of r? How big a problem does serial correlation seem to be?

(ii) Estimate the accelerator model by PW, and compare the estimate of b1 to the OLS estimate.

Why do you expect them to be similar?

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