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Assignment
ECON 323: Econometric Analysis Instructions: While cooperating on the assignment is encouraged, pla- giarism is not. I will only accept hand written assignment submitted in person. DO NOT SUBMIT YOUR ASSIGNMENT ELECTRONICALLY. Late assignments will receive a 10% penalty per day that it is late, up to the time that it is corrected in class, after which they will receive a mark of zero. Show your work as no marks will be allocated for the final an- swer alone. For the intermediate deadlines, the weight will be transferred to the final submission upon the upload of a vif to VIF.uwaterloo.ca or the self-declaration of an absence. No late assignments will be accepted for the intermediate deadlines. Use Stata or R to do these. If you choose to use another software, please get my approval at least a week before the assignment is due. Question 1 Use the following series available on Statistics Canada’s website except where specified otherwise. Use all series for Canada as a whole using a monthly frequency. • New motor vehicle sales, units, unadjusted (Table: 20-10-0001-01) • Consumer Price Index, all items, (Table: 18-10-0004-01) 1 • Residential Mortgage loans held in charter banks (Table: 36-10-0639- 01) • Population, 15+ y o (Table: 14-10-0017-01) Use the longest common time period available to do the assignment, but only collect data up to and including October 2023. (a) Report the summary statistics for the series mentioned above. Graph them and report all results. (b) Calculate the inflation rate and report summary statistics for the series. (c) Should you seasonally adjust your series? Why or why not? If you think that you should, calculate the new series and report their summary statistics. (d) Regress the number of new cars sold on the residential mortgage loans, population and the inflation rate. Report and interpret your results. (e) Should you control for trends? Justify and modify your answers in (d) as you see fit. (f) Introduce a lag of your dependent variable in your model. Why did you do this? What can you conclude from your results? (g) How many lags do you think would be optimal? Using methods covered in class, test your hypothesis. (h) Is serial correlation of the errors present in this model? Use two tests for different lag orders to determine this and only include 1 lag of the dependent variable in your model. (i) How can you correct for serial correlation of the errors of order 1? Either do it if you found that it existed in the previous question and discuss the change in your results or explain how it would affect your results if it had been present and why you think that it isn’t in your model.