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School of Economics, Finance and Banking College of Business Beeq5113 Applied Econometrics SECOND SEMESTER 2017/2018 Exercise 3

This document contains instructions for an applied econometrics exercise asking students to analyze time series economic data. It asks students to define key econometrics concepts like deterministic vs stochastic trends, spurious regression, unit roots, cointegration, and error correction models. It then instructs students to obtain their own time series data, perform unit root and cointegration tests, and estimate a vector autoregression or vector error correction model to analyze the relationship between the variables.

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Eason Saint
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84 views1 page

School of Economics, Finance and Banking College of Business Beeq5113 Applied Econometrics SECOND SEMESTER 2017/2018 Exercise 3

This document contains instructions for an applied econometrics exercise asking students to analyze time series economic data. It asks students to define key econometrics concepts like deterministic vs stochastic trends, spurious regression, unit roots, cointegration, and error correction models. It then instructs students to obtain their own time series data, perform unit root and cointegration tests, and estimate a vector autoregression or vector error correction model to analyze the relationship between the variables.

Uploaded by

Eason Saint
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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SCHOOL OF ECONOMICS, FINANCE AND BANKING

COLLEGE OF BUSINESS

BEEQ5113 APPLIED ECONOMETRICS


SECOND SEMESTER 2017/2018

EXERCISE 3

Instructor: AP. DR. SALLAHUDDIN HASSAN

1. What is the different between a deterministic trend and a stochastic trend?

2. Explain the term spurious regression and provide an example from economic time-series
data?

3. Explain the meaning of unit root. Explain how unit root can be tested? Why it is
important to test for stationarity.

4. Explain the meaning of cointegration. Why is it so important for economic analysis?


Why is it necessary to have series that are integrated of the same order in order to
possibly have cointegration? Give example.

5. What is the error-correction model? When is it needed in economic analysis?

6. Using your own data, do the following:

(a) Obtain sample correlograms up to 24 lags. What strikes you about this
correlogram?

(b) Are the series stationary or nonstationary?

(c) Are the series cointegrated?

(d) Estimate a VAR or VECM for the set of your variable [Limit your estimation to
three endogenous variables]. Explain why do need to choose one of these
methods.

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