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Question Two. Let (y) and (zu) denote two stochastical processes related through the following system ya = b10 - 0122+ + 71119-1 + 711227-1 + Eyt. bir Zz = b20 - 121 + 712141-1 + 7122Zt-1 + Ezt where Eye and Ezt are independent white noise processes. a) Explain the difference between a structural VAR and a VAR in standard (i.e. reduced) form. Transform the above model into the standard form. (Use matrix notation where convenient). b) Explain the identification problem and the meaning of the coefficients bizand b21. How can we solve the identification problem? c) Under which conditions y, and/or Ze stationary? d) Explain Granger causality and exogeneity and the difference between these two concepts. How could you test for exogeneity? e) Your conjecture that the above variables might be cointegrated and want to test for it. How many cointegrating vectors can there be at most? Question Two. Let (y) and (zu) denote two stochastical processes related through the following system ya = b10 - 0122+ + 71119-1 + 711227-1 + Eyt. bir Zz = b20 - 121 + 712141-1 + 7122Zt-1 + Ezt where Eye and Ezt are independent white noise processes. a) Explain the difference between a structural VAR and a VAR in standard (i.e. reduced) form. Transform the above model into the standard form. (Use matrix notation where convenient). b) Explain the identification problem and the meaning of the coefficients bizand b21. How can we solve the identification problem? c) Under which conditions y, and/or Ze stationary? d) Explain Granger causality and exogeneity and the difference between these two concepts. How could you test for exogeneity? e) Your conjecture that the above variables might be cointegrated and want to test for it. How many cointegrating vectors can there be at most