Question: This question is about time series econometrics. (a)Assuming , randomly generate 500 observations of variables X and Y using the following equations: X t =

This question is about time series econometrics.

(a)Assuming , randomly generate 500 observations of variables X and Y using the following equations:

Xt = pXt-1 + et

Yt = pYt-1 + et

Then REPORT the graphs of x and y. Then run the following regression and reports the regression results: Yt = Alpha + BetaXt + et.

(b) What did you expect about the magnitudes Betaand R-square? How are the estimated values different from your expectations?

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