You Have Collected Quarterly Data for the Unemployment Rate (Unemp)in

question 13

Essay

You have collected quarterly data for the unemployment rate (Unemp)in the United States,using a sample period from 1962:I (first quarter)to 2009:IV (the data is collected at a monthly frequency,but you have taken quarterly averages).
a.Does economic theory suggest that the unemployment rate should be stationary?
b.Testing the unemployment rate for stationarity,you run the following regression (where the lag length was determined using the BIC;using the AIC instead does not change the outcome of the test,even though it chooses 9 lags of the LHS variable): t = 0.217 - 0.035 Unempt-1 + 0.689 ΔUnempt-1
(0.01)0.0012)(0.054)
Use the ADF statistic with an intercept only to test for stationarity.What is your decision?
c.The standard errors reported above were homoskedasticity-only standard errors.Do you think you could potentially improve on inference by allowing for HAC standard errors?
d.An alternative test for a unit root,the DF-GLS,produces a test statistic of -2.75.Find the critical value and decide whether or not to reject the null hypothesis.If the decision is different from (c),is there any reason why you might prefer the DF-GLS test over the ADF test?

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Definitions:

ERP

Event-Related Potential; a measured brain response that is the direct result of a specific sensory, cognitive, or motor event.

Non-Invasive

Procedures or techniques that do not require entering the body or breaking the skin, often used in medical treatments and diagnostics to reduce risk and discomfort.

Expensive

A term used to describe an item, service, or commodity that requires a significant amount of money to purchase or maintain.

Place Cells

Place cells are neurons in the hippocampus that become active when an animal is in or is thinking about a specific location, playing a key role in spatial memory and navigation.