Question: Consider the following estimated time series regression using the data upto year 2013: APLCt = Bo+ BIAPLCt-1+ 1AGDPt-1+ . . .+ PqAPLCt-q1 + @q2AGDPt-q2 +

Consider the following estimated time series regression using the data upto year 2013: APLCt = Bo+ BIAPLCt-1+ 1AGDPt-1+ . . .+ PqAPLCt-q1 + @q2AGDPt-q2 + Ut Choose the optimal lag lengths for APLC and AGDP using BIC; then make a forecast for PLC in (1,1) (2,2) (3.3 (4,4 0.017 0.015 0.013 Bo 0.011 (3.204) (2.517) (1.845) (1.358) 0.516 0.676 0.660 0.659 B1 (3.930) (4.298) (3.985) (3.951) -0.391 -0.538 -0.514 -0.529 0 1 (-2.508) (-3.116) (-2.818) (-2.894) -0.271 -0.263 -0.258 B-2 (-1.651) (-1.300) (-1.231) 0.306 0.292 0.340 012 (1.706) (1.384) (1.525) 0.024 -0.110 B3 (0.141) (-0.522) 0.060 0.166 03 (0.313) (0.756) 0.240 BA (1.376) -0.122 04 (-0.610) BIC -6.903 -6.829 -6.696 -6.595 year 2014 and compute the forecast error based on the following data. Year 2010 2011 2012 2013 2014 PLC 1.059 1.113 1.123 1.108 1.060 GDP 1.483 1.552 1.576 1.647 1.685

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