Question: Please show work for a thumbs up:) Consider the bivariate VAR(1) process, where y = (41,4, Y2,4)': 1 = yt ut Ayt-1+ut WN(0, 2) [0.4

Please show work for a thumbs up:)

Please show work for a thumbs up:) Consider the bivariate VAR(1) process,

Consider the bivariate VAR(1) process, where y = (41,4, Y2,4)': 1 = yt ut Ayt-1+ut WN(0, 2) [0.4 0.3 0.8 0.6 A = (a) Show that y1, and y2,t are cointegrated. (b) Write the model in error correction form. Compute the speed of adjustment co- efficient a and the cointegrating vector B, where the B on yi,t is normalized to 1. Consider the bivariate VAR(1) process, where y = (41,4, Y2,4)': 1 = yt ut Ayt-1+ut WN(0, 2) [0.4 0.3 0.8 0.6 A = (a) Show that y1, and y2,t are cointegrated. (b) Write the model in error correction form. Compute the speed of adjustment co- efficient a and the cointegrating vector B, where the B on yi,t is normalized to 1

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