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In order to observe the correlations between each variable, the most effective method to use is Vector Autoregression (VAR). VAR estimation uses a system of simultaneous equations to observe interdependencies throughout multiple time-series data.
The VAR is unrestricted; it will produce a theory-free estimation of economic relationships. It is imperative to understand that the estimation will not test any economic theories, nor will it analyse any government policies such as inflation targeting. The VAR will purely estimate the correlations between the specified macroeconomic variables over the time period. This paper's empirical set-up is largely borrowed from Jiménez-Rodríguez, R. and Sánchez, M. (2004) as their study was very similar to this paper, but focuses onseveral OECD countries, not just the UK. The borrowed methodology is using an unconstrained vector autoregression which is then transformed into its Moving Average Representation form in order to estimate the impulse response functions. The following vector autoregression of order p, where p is the number of lags is estimated;
Where, = GDP, = Oil Prices, = Inflation rate, = Interest Rate, = Unemployment rate and = Real exchange rate. Finally, is the error term for each equation.
determinants of money supply
Explain the Exchange rate system in western world The most common exchange rate system in western world during previous century was the fixed exchange rate system. Up to 1930s,
ihave real gdp per capita for all countries in world .. how can i calculate world real gdp per capita by using the data.
Calculating interest rates on a yearly basis If maturity is different from one year, interest rate is generally recalculated to a corresponding one year rate. For instance con
c) Explain why perfectly competitive markets lead to an allocatively efficient allocation of resources in the long run
what is the basis of fixation
Which of the following will decrease the nominal deficit? A. An increase in taxes. B. An increase in the debt. C. An increase in government expenditures. D. An increase in interest
DETERMINATION OF FACTOR PRICES BY SUPPLY AND DEMAND Let us suppose that perfect competition prevails in the goods and the factor markets. In such a situation let us see how th
Introducing the Foreign Trade Sector Most economies in the real world are open economies. They engage in trade with other economies. Goods and services are exported and import
graph the central equation of the solow model. argue that a steady state exists and that the economy will converge to this point from any initial starting capital stock
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