Assuming That You Have a VAR Model with 2 Variables

question 8

Multiple Choice

Assuming that you have a VAR model with 2 variables (A and B) including many lags, how can you test whether A cause Granger-causes changes in B?

• A) By observing if the differences in correlation between A and B are statistically significant
• B) Impose restrictions that all the coefficients of the lags of A are equal to 0 in the equation for B of the VAR model and test the joint hypothesis within the F-test framework
• C) Impose restrictions that all the coefficients of the lags of B are equal to 0 in the equation for A of the VAR model and test the joint hypothesis within the F-test framework
• D) None of the above

---

Definitions:

Minority Job Applicants

Individuals from recognized minority groups applying for employment.

Red Hair

A hair color characterized by high levels of the pigment pheomelanin, resulting in varying shades of red.

WARN

The Worker Adjustment and Retraining Notification Act, a U.S. labor law requiring most employers with 100 or more employees to provide 60-day advance notification of plant closings and mass layoffs.

Flash Flood

A rapid flooding of low-lying areas, usually caused by intense rainfall over a short period of time.