Problem 4 (30 marks). a) Inflation, denoted as (X), is a key target variable for mon- etary policy and if its forecasts are outside the interval [0.5, 3), then we say that predicted inflation is off-target and the Central Bank needs to intervene. (i) The last T 100 values of (Xi) give the following sample autocorrelations k) and partial autocorrelations (k) : lag k-1k-2 k3k 0.9144 0.7620 0.5984 0.4500 (A) | 0.9144 |-0.4523 | 0.0883 1-00258 Problem 4 (30 marks). a) Inflation, denoted as (X), is a key target variable for mon- etary policy and if its forecasts are outside the interval [0.5, 3), then we say that predicted inflation is off-target and the Central Bank needs to intervene. (i) The last T 100 values of (Xi) give the following sample autocorrelations k) and partial autocorrelations (k) : lag k-1k-2 k3k 0.9144 0.7620 0.5984 0.4500 (A) | 0.9144 |-0.4523 | 0.0883 1-00258