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Question: a. Using data on ?Y (the growth rate in GDP) from 1955:1 to 2009:4, estimate an AR(1) model with GARCH(1,1) errors.
b. Plot the residuals from the AR(1) model along with ±t bands as in Figure 16.4.
c. Some macroeconomists have claimed that there was a sharp drop in the variability of ?Y around 1983, which they call the "Great Moderation." Is this Great Moderation evident in the plot that you formed in (b)?
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