Time Series - Non-stationary data 

Due: Nov. 7, 2007

Use the mes.dta dataset from MacKuen, Erikson and Stimson (data
described in article on the web).

1. Work with the 3 variable model as they do. Test each of the 3
   variables for stationarity using an ADF test (or a simple DF if you
   cannot do ADF). What do you conclude.

2. Now test to see if the three variables are co-integrated.

3.  If they are, fit an error correction model.

4. Interpret via impluse response and unit response graph as per last week.