Question: 3. Describe how you would formulate a model to test Purchasing Power Parity using the cointegration test. You must clearly state the model specification, null

3. Describe how you would formulate a model to test Purchasing Power Parity using the cointegration test. You must clearly state the model specification, null hypothesis, variable definition, and test statistics.

4. Suppose that we want to estimate the effect of several variables on annual coonsumption and that we have a panel data set on individuals collected on January 31, 2017 and January 31, 2018. If we include a year dummy for 2018 and use first differencing, can we also include age in the original model? Explain.

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