Econometrics for Data Science Assignment

Assignment Task

Data

You will have to collect monthly data on the series listed below. Collect data on all series from October 2014 till the latest date for which data are available.

• Dow-Jones industrial average
• Gold prices (Gold Dec 22 (GC=F))
• M2 (money supply)

The lecturer will assign each group three series from the above list to ensure that each group works on a different set of data.

Questions

1. Make a table for descriptive summary of the variables and explain the table if you observe any unusual or any important figures that you want to highlight You may convert your data to natural logs for the next set of questions

2. Explain the ADF test for unit root testing, stating the null hypothesis clearly. Test your allotted three series for unit roots using the ADF test. Appropriately difference the series (if required) to render them stationary. 

3. Determine the lags that will be required for the VAR model. Give your reasons for the lags chosen.

4. Estimate the VAR model. Comment on your results.

5. Use an appropriate test to determine if any lags can be excluded 

6. Check for autocorrelation in the disturbances of the VAR model

7. Check the stability conditions needed to compute the IRFs

8. Test for Granger-causality in the three series assigned to you. Interpret your results. 

9. Report IRFs using an appropriate IRF command. Ensure that the graphs are of good size and the contents of the graph are clearly visible. Interpret your IRF graphs. 

10. Present the main findings of your exercises.

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