performed the Engle-Granger test and the results are reported below. At the 10% significance level, what...

  

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performed the Engle-Granger test and the results are reported below. At the 10% significance level, what can you infer about the test result? [2] Date: 09/26/21 Time: 18:41 Series: LCP LEXRATE Sample: 2010M02 2021M08 Included observations: 139 Cointegrating equation deterministics: C @TREND Automatic lags specification based on Schwarz criterion (maxlag=13) Dependent LCP LEXRATE tau-statistic Prob.* Z-statistic -3.190570 0.2014 -24.24388 -3.649976 0.0799 -24.57190 *MacKinnon (1996) p-values. Prob.* 0.0683 0.0641 At 10% significance level, reject null hypothesis of no cointegration. Residuals do not contain unit root, variables are cointegrated Engle-Granger test determines cointegration. Null hypothesis - no cointegration. This exists if there is a unit root. Significance level = 0.1. P values corresponding to z test statistic of both LCP and LEXRATE < 0.1 LCP 0.068 0.1, LEXRATE 0.0641 <0.1 (g) Given your findings in part (f), what can you say about your answer in part (e)? [2] (h) Is the sign of the coefficient on LCP in part (e) regression result consistent with economic intuition? Explain. [2] performed the Engle-Granger test and the results are reported below. At the 10% significance level, what can you infer about the test result? [2] Date: 09/26/21 Time: 18:41 Series: LCP LEXRATE Sample: 2010M02 2021M08 Included observations: 139 Cointegrating equation deterministics: C @TREND Automatic lags specification based on Schwarz criterion (maxlag=13) Dependent LCP LEXRATE tau-statistic Prob.* Z-statistic -3.190570 0.2014 -24.24388 -3.649976 0.0799 -24.57190 *MacKinnon (1996) p-values. Prob.* 0.0683 0.0641 At 10% significance level, reject null hypothesis of no cointegration. Residuals do not contain unit root, variables are cointegrated Engle-Granger test determines cointegration. Null hypothesis - no cointegration. This exists if there is a unit root. Significance level = 0.1. P values corresponding to z test statistic of both LCP and LEXRATE < 0.1 LCP 0.068 0.1, LEXRATE 0.0641 <0.1 (g) Given your findings in part (f), what can you say about your answer in part (e)? [2] (h) Is the sign of the coefficient on LCP in part (e) regression result consistent with economic intuition? Explain. [2]

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Based on the above calculations Scenario 1 has lesser cost ... View the full answer