Question: Using the data on LPCE and LDPI introduced in Section 21.1 (see the books website for the actual data), develop a bivariate VAR model for

Using the data on LPCE and LDPI introduced in Section 21.1 (see the book’s website for the actual data), develop a bivariate VAR model for the period 1970–I to 2006–IV. Use this model to forecast the values of these variables for the four quarters of 2007 and compare the forecast values with the actual values given in the dataset.

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