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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.
C=Ca+.95(Y-T) Ca=400-20r T=1200 + .4Y (M/P)^d = .35Y - 5r (M^s/P)=2000 Ip=1500-20r G=2200 NX=500-.06Y a. Compute the multiplier b. Derive the equation for Ap c. Derive the equatio
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Construct two graphs that exhibit equilibrium in the petrol market - assume that there are no taxes. Clearly label the equilibrium values. (a) Graph the AFC, AVC, ATC, and MC fu
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In a ___________ exchange rate system each trading nation is impacted directly by the supply and demand for their currency. A) Fixed B) Dirty C) Floating D) Clean
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Suppose that a paper mill "feeds " a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit o
State the term- - GDP is a flow Lastly, note that GDP is a flow variable and not a stock variable. By a flow variable we mean a variable which is measured in something per uni
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