Download presentation

Presentation is loading. Please wait.

Published byAnna McIntosh Modified over 4 years ago

1
International Macroeconomics: MSc Economics Week 1: Question 1 Peter Stanley, David Glover, Daniel Funge and Bruce Moniri

2
(a) Import the data into EViews 6. Go to file – open – Foreign Data Workfile Choose relevant file/data source (pppdata.xls) Format data as desired on Spreadsheet Read menu

3
Data 91 products representing a good for each country Q - represents the log of relative prices Q = In([p*e]/q) p – price of an unspecified good in a non US OECD country ( x ) q – price of the same good in the US e – nom exchange rate between the US and x. Monthly data from Jan81 – Dec95 (180 observations) for each good.

4
Data -7.50937808291180 ……… -7.145439293912 -7.061058539911 ……… -3.5839355182180 ……… -3.74961164222 -3.69617048121 -3.6603777711180 ……… -3.7164177212 -3.64243684911 QPanelIDDATE

5
(b) Conduct unit root tests on Q reporting results with and without a trend. Process: View – Unit Root Test – choose root test (Lin-Levin or Im, Pesaran and Shin). Check menu box corresponding to trend/no trend choice.

6
Results 0-18.8305trendIm, Pesaran and Shin W-stat 0-7.04755no trendIm, Pesaran and Shin W-stat 14.61616trendLevin, Lin & Chu t* 0.78340.78362no trendLevin, Lin & Chu t* Prob.**Statistic Trend/ No TrendMethod

7
Does the real exchange rate have a unit root? (LL test) Interpretation of Lin Levin results: for 5% significance level. If P > 0.05 Cannot reject unit root in all series. If P < 0.05 Reject. Our P (no trend): 0.7834 With trend: 1 Therefore, we cannot reject the existence of a unit root in all series.

8
Does the real exchange rate have a unit root? (IPS) Interpretation of Im, Pesaran & Shin test results: for 5% significance level. If P > 0.05 Cannot reject unit root in all series. If P < 0.05 Reject. Our P (no trend): 0 With trend: 0 Therefore, we can reject the existence of a unit root in all series, i.e. IPS suggests that at least one series is stationary.

9
(c) Estimate an AR(1) Model for Q using the fixed effects estimator. Fixed effects requires the creation of a dummy for each panel cross section. EViews will do this for you if you ensure your data is set in a recognised panel format. Process: Quick – Estimate Equation – Type equation as Q = C(1) + C(2)*Q(-1) - select fixed effects in panel options.

10
Results 0715.09810.0013780.985667Q(-1) 0-10.31190.005007-0.05163C Prob.t-StatisticStd. ErrorCoefficient

11
What is the half-life for the real exchange rate? Take coefficient 0.985667 from fixed effects panel regression. Using 1 as the t=1 value, calculate number of periods required to take series value to 0.5. Using formula: log(0.5)/log(p)=log(0.5)/log(0.985667)=48.01

12
Half-life

13
(d) Estimate an AR(1) model for each good separately. Process: un-stack the data using the reshape current page function in EViews. This splits panel data into separate cross- sections. Then run an AR(1) on each separate cross- section. Results – Mean: 0.9811, Standard Deviation: 0.02339

14
Results

Similar presentations

Presentation is loading. Please wait....

OK

Econometric Modeling Through EViews and EXCEL

Econometric Modeling Through EViews and EXCEL

© 2018 SlidePlayer.com Inc.

All rights reserved.

To make this website work, we log user data and share it with processors. To use this website, you must agree to our Privacy Policy, including cookie policy.

Ads by Google