Suppose You Estimate a Static Time-Series Model of U A)How Do You Interpret the Estimated Sample Regression Function? Explain

question 10

Essay

Suppose you estimate a static time-series model of U.S.Personal Consumption Expenditures (billions)on U.S.Personal Income (billions)using quarterly data for the period 1969Q1-2013Q3 and you get $$\begin{array} { c } \text { Consumption } _ { t } =& - 141.454 +& 0.822 \text { Income } _ { t } \\&( 11.244 )& ( 0.002 ) \\&n = 179 \\&R ^ { 2 } = .9993\end{array}$$
a)How do you interpret the estimated sample regression function? Explain.
b)You wonder if previous values of income affect consumption.Explain how you would estimate a distributed lag model of order 2.
c)Using the model in part c,how would you test for a statistical relationship between past values of income and consumption?
d)If you thought there was a structural break in these data in 2006Q1,how would you control and test for it?

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