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For the Money Supply, GNP and interest rate series data for the U.S. given on the Springer web site as MACRO.ASC, ?t a VAR three equation model using:
(a) Two lags on each variable.
(b) Three lags on each variable.
(c) Compute the Likelihood Ratio test for part (a) versus part (b).
(d) For the two-equation VAR of Money Supply and interest rate with three lags on each variable, test that the interest rate does not Granger cause the money supply?
(e) How sensitive are the tests in part (d) if we had used only two lags on each variable.
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