Research Paper on Statistic

Submitted By Franchie1
Words: 299
Pages: 2

Are savings and investment co-integrated?
Consider the following relationship between saving and investment: invt = f( savt) (i) Where invt and savt are investment and saving in time t, respectively. The data file Saving contains the two series collected from the Economic Report of the President, 2013. This project is an attempt to understand and replicate Professor Miller’s paper: (Are savings and Investment Co-integrated? Economics Letters 27 (1988): 31-34). Professor Miller is our former chair; his office is BEH 503). Plot each series and interpret your findings. Estimate the double logged (Ln) model: Ln(invt) = β0 + β1 Ln (sav) + εt a. Interpret the coefficient estimates. b. Test for first order serial correlation using Durbin-Watson test. c. Would you expect this regression to suffer from spurious regression phenomenon? Why? Estimate the model Ln(invt) = β0 + β1 Ln (savt) + εt correcting for serial correlation encountered in (ii). Estimate the autoregressive model: Ln(invt) = β0 + β1 Lninvt-1,+ β2Ln( savt ) + εt a. Interpret the coefficient on Ln(invt-1). b. Test for first order serial correlation using Durbin-h test. c. Hint: Construct a table that contains regression results in (iii)-(v). Using the series in logged form test for Ganger Causality lagging the series two periods and interpret your findings. Using the Augmented Dickey Fuller and the Phillips-Perron approaches, test if the series are stationary in level and in first difference.(Construct a table of