Using the data in Table 13.4, estimate a VAR model for C, and Y, with one lag and two lags.

(a) Is the model with two lags better than the model with one lag? Use the AIC and BIC criteria (see Section 13.5). Also check for residual autocorrelations.

(b) Since the data are quarterly, regress the data on seasonal dummies and compute the residuals. Repeat the analysis with these residuals (assuming that they are the observations).