Box-Jenkins Approach - ARMA or ARIMA Models - ARCH or GARCH Models - Vector Autoregressive Models VAR- Economics Assessment Answer

Assessment Task:

Vector Autoregressive Models VAR- Economics Assessment Answer

Questions

Q1.     Outline the major steps involved in the application of the Box–Jenkins approach for ARMA or ARIMA models. Following is the graph of correlograms (ACF and PACF) identify the ARIMA or ARMA (please specify with argument) model to be estimated. Write the general form of AR and MA models (also specify from where you identify the AR & MA terms.

Q2.    

(i) Explain why and when we use ARCH or GARCH models. Write ARCH and GARCH models in equation from, for ARCH(1), ARCH(3), ARCH(6) and GARCH(1,1).

(ii) Following are the simple graph and ARCH test statistics, identify which of the following series has ARCH effect and explain your result:

(iii) Following are the result of ARCH and GARCH models, write the model in equation forms of ARCH and GARCH models. Also explain how any researcher can forecast the future values by using these specific models.

Q3.    

(a) A researcher intends to find the relationship between two variables say CPI and LSM. Guide him for this research question by using your knowledge about time series methodology (short run, long run, causal etc.).
(b) Below is the output (by using Eviews software) for Granger’s Causality test, elaborate the result.

(c) Following is the output of the Vector Autoregressive Model (VAR), write the model in equation form and forecast the dependent variables and complete forecasted table:

Q5. The output (below) of Johnson’s Co-integration method, interpret your result and guide the researcher for the relationship between the variable is this short run or long run relationship?            

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