Question: Using the same data as in Exercise 14.2, a researcher tests for a stochastic trend in In(IPt) using the following regression: where the standard errors

Using the same data as in Exercise 14.2, a researcher tests for a stochastic trend in In(IPt) using the following regression:

where the standard errors shown in parentheses are computed using the homoskedasticity-only formula and the regressor "t" is a linear time trend.
a. Use the ADF statistic to test for a stochastic trend (unit root) in In(IP).
b. Do these results support the specification used in Exercise 14.2? Explain.
Data as in Exercise 14.2

Using the same data as in Exercise 14.2, a researcher

1nUR) : 0.061 + 0.000041-0.01 81n(IR) + 0.333Aln(IP-) + 0.162aln(IP,-2) (0.024) (0.00001) (0.007) (0.075) (0.055) Date 2000:7 2000:8 2000:9 2000:10 2000:1 2000:12 IP 147595 148650 48.973 148.660 48206 147300 AR Order 6 SSR 29,175 28,538 28393 28391 28,378 28.317

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