Use the data in APPROVAL to answer the following questions. The data set consists of 78 months of data during the presidency of George W. Bush. (The data end in July 2007, before Bush left office.) In addition to economic variables and binary indicators of various events, it includes an approval rate, approve, collected by Gallup. (Caution: One should also attempt Computer Exercise C14 in Chapter 11 to gain a more complete understanding of the econometric issues involved in analyzing these data.)

(i) What is the range of the variable approve? What is its average value?

(ii) Estimate the model

approve_t = β₀ + β₁lcpifoodt + β₂lrgaspricet + β₃unemployt + u_t,

where the first two variables are in logarithmic form, and report the estimates in the usual way.

(iii) Interpret the coefficients in the estimates from part (ii). Comment on the signs and sizes of the effects, as well as statistical significance.

(iv) Add the binary variables sep11 and iraqinvade to the equation from part (ii). Interpret the coefficients on the dummy variables. Are they statistically significant?

(v) Does adding the dummy variables in part (iv) change the other estimates much? Are any of the coefficients in part (iv) hard to rationalize?

(vi) Add lsp500 to the regression in part (iv). Controlling for other factors, does the stock market have an important effect on the presidential approval rating?