If we want to test whether spread helps to predict output growth at horizon h, then:

1. Why and how do we estimate a regression?
2. The test relies on a t-statistic, and the validity of the test relies on some assumptions, Which ones? How might this change with the horizon?
3. Why do we need to use 'newey' instead of 'reg' when performing the test at h=8?

Answer rating: 100% (QA)

1 To test whether spread helps to predict output growth at horizon h we can estimate a regression model using historical data The regression model will allow us to examine the relationship between the ... View the full answer