c. Suppose that we had data on the CLP:GBP exchange rate and applied the Augmented Dickey Fuller test. When testing for a unit root against the alternative of a constant mean we find that we cannot reject the null at the 10% level of significance. When testing for a unit root against the alternative of a deterministic time trend we find that we can reject the null at the 5% level of significance but not at the 1% level of significance. What would be your conclusion as to the stationarity of the exchange rate series? What implications would this have for the further analysis of the series? [15 marks] b. Consider the process: Yt = 1.2 + 0.4yt-1 + t 0.7&t-1, Et~IID(0,02) Can this ARMA(1,1) process be expressed as an AR process? If so, give the first four terms of the equivalent AR process. [15 marks] c. Suppose that we had data on the CLP:GBP exchange rate and applied the Augmented Dickey Fuller test. When testing for a unit root against the alternative of a constant mean we find that we cannot reject the null at the 10% level of significance. When testing for a unit root against the alternative of a deterministic time trend we find that we can reject the null at the 5% level of significance but not at the 1% level of significance. What would be your conclusion as to the stationarity of the exchange rate series? What implications would this have for the further analysis of the series? [15 marks] b. Consider the process: Yt = 1.2 + 0.4yt-1 + t 0.7&t-1, Et~IID(0,02) Can this ARMA(1,1) process be expressed as an AR process? If so, give the first four terms of the equivalent AR process. [15 marks]