Question: Suppose that you have three variables , a. Explain in detail how you would test for the presence of a unit root in each of

Suppose that you have three variables ,

a. Explain in detail how you would test for the presence of a unit root in each of these series. Show all the details of the test including applied steps, the hypotheses tested, and any related explanations.

b. Suppose that you find a unit root in each of the models, explain in detail how you would test for the presence of a cointegration relationship between these variables. Show all the details of the test including applied steps, the hypotheses tested, and any related explanations.

c. Suppose that you have found evidence for cointegration, explain what model you would apply to estimate the relationship between these series in the short run and why. Show all the details of the test including applied steps, the hypotheses tested, and any related explanations.

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