Business, 03.12.2021 17:30, andrwisawesome0
You want to determine whether or not the unemployment rate for the United States has a stochastic trend using the Augmented Dickey Fuller Test (ADF). The BIC suggests using 3 lags, while the AIC suggests 4 lags. (a) Which of the two will you use for your choice of the optimal lag length? (b) After estimating the appropriate equation, the t-statistic on the lag level unemployment rate is – 2.186 (using a constant, but not a trend). What is your decision regarding the stochastic trend of the unemployment rate series?
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