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.