Assume That You Have Used the OLS Estimator in the Cointegrating

question 9

Multiple Choice

Assume that you have used the OLS estimator in the cointegrating regression and test the residual for a unit root using an ADF test.The resulting ADF test statistic has a

• A)normal distribution in large samples.
• B)non-normal distribution which require ADF critical values for inference.
• C)non-normal distribution which require EG-ADF critical values for inference.
• D)normal distribution when HAC standard errors are used.

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Definitions:

Managed Float

A currency exchange rate policy where the central bank allows the currency value to fluctuate in the foreign exchange market but intervenes to prevent excessive movements.

Fixed Rate System

A monetary system in which exchange rates are set and maintained at a certain level by a government or central bank.

Flexible Exchange Rates

A system in which the worth of a currency is permitted to vary based on the foreign exchange market, free from direct governmental interference.

Economic Growth

An increase in the amount of goods and services produced per head of the population over a period of time, typically seen as an indicator of the economic health of a country.