For the United States, There Is Somewhat Conflicting Evidence Whether

question 40

Essay

For the United States, there is somewhat conflicting evidence whether or not the inflation
rate has a unit autoregressive root.For example, for the sample period 1962:I to 1999:IV
using the ADF statistic, you cannot reject at the 5% significance level that inflation
contains a stochastic trend.However the null hypothesis can be rejected at the 10%
significance level.The DF-GLS test rejects the null hypothesis at the five percent level.
This result turns out to be sensitive to the number of lags chosen and the sample period.
(a)Somewhat intrigued by these findings, you decide to repeat the exercise using Canadian
data.Letting the AIC choose the lag length of the ADF regression, which turns out to be
three, the ADF statistic is (-1.91).What is your decision regarding the null hypothesis?

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Definitions:

Dependent Variable

A variable in statistical modeling, experiments, or observations that is expected to change as a result of manipulations in the independent variable(s).

Independent Variables

Variables that are manipulated or categorically varied by researchers in an experiment to determine their effect on dependent variables.

Multicollinearity

Refers to a situation in statistics where independent variables in a regression model are highly correlated, potentially leading to difficulties in estimating the relationship between each independent variable and the dependent variable.

Independent Variables

Variables in an equation or model that are assumed to influence or cause changes in dependent variables.