You Have Re-Estimated the Two Variable VAR Model of the Change

question 45

Essay

You have re-estimated the two variable VAR model of the change in the inflation rate and the unemployment rate presented in your textbook using the sample period 1982:I (first quarter)to 2009:IV.To see if the conclusions regarding Granger causality of changed,you conduct an F-test for this new sample period.The results are as follows: The F-statistic testing the null hypothesis that the coefficients on Unempt-1,Unempt-2,Unempt-3,and Unemplt-4 are zero in the inflation equation (Equation 16.5 in your textbook)is 6.04.The F-statistic testing the hypothesis that the coefficients on the four lags of ΔInft are zero in the unemployment equation (Equation 16.6 in your textbook)is 0.80.
a.What is the critical value of the F-statistic in both cases?
b.Do you think that the unemployment rate Granger-causes changes in the inflation rate?
c.Do you think that the change in the inflation rate Granger-causes the unemployment rate?

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Definitions:

Stimulus Motives

Needs, desires, or impulses that prompt behaviors aimed at seeking external stimuli to satisfy internal psychological states.

Developmental Motives

The driving forces behind the psychological changes and growth that occur over a person's lifetime.

Exploratory Motives

The intrinsic drive in individuals to explore, investigate, and learn about their environment.

External Locus of Control

A belief system where individuals perceive their successes or failures as influenced by external forces beyond their control.