Question: Use the data in WAGEPRC for this exercise. Problem 5 in Chapter 11 gave estimates of a finite distributed lag model of gprice on gwage,

Use the data in WAGEPRC for this exercise. Problem 5 in Chapter 11 gave estimates of a finite distributed lag model of gprice on gwage, where 12 lags of gwage are used.

(i) Estimate a simple geometric DL model of gprice on gwage. In particular, estimate equation

(18.11) by OLS. What are the estimated impact propensity and LRP? Sketch the estimated lag distribution.

(ii) Compare the estimated IP and LRP to those obtained in Problem 5 in Chapter 11. How do the estimated lag distributions compare?

(iii) Now, estimate the rational distributed lag model from (18.16). Sketch the lag distribution and compare the estimated IP and LRP to those obtained in part (ii).

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