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Chapter 12

(1) Visit the St. Louis Federal Reserve’s Fred database (https://fred.stlouisfed.org/). Download the two variables as monthly for the Jan. 1, 1960 – Dec. 2019 time period (33pts).

       -  Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL)

- Hint: Download the CPIAUCSL in units as (‘Percent Change from Year Ago.” The option is under the tab “edit graph”)

         - Unemployment Rate (UNRATE)

- Hint: Download the UNRATE (Don’t download the UNRATE as “Percent change from a year ago. Download it in levels.)

a. Ensure that the CPI is transformed into annualized inflation rates (see hint above). Generate a scatterplot by decade with the unemployment rate on the y-axis and inflation on the x-axis. There should be 7 scatterplots.



b. Estimate a simple regression for each decade in excel with the unemployment rate as your dependent variable and inflation as your explanatory variable (include an intercept term in your regression). Report the R-square for each regression and include a scatterplot with the “line of best fit.”.


c. Interpret your explanatory variable (i.e. inflation) coefficients from your simple regression for each decade.  


d. Provide an intuitive interpretation of the p-values and R-Squares for the coefficients of the explanatory variable.

 

e. Why do you suppose the coefficients are different (i.e. there is no one correct answer. I just want you to think through and research a bit online why it may have changed)?




Chapter 13

(2) Visit the St. Louis Federal Reserve’s Fred database (https://fred.stlouisfed.org/). Download the two variables as quarterly for the Jan. 1, 1960 – Dec. 2019 time period (33pts).

         - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL)

- Hint: Download the CPIAUCSL in units as (‘Percent Change from Year Ago.” The option is under the tab “edit graph”. Click on the “modify frequency tab to change to quarterly)

         - Unemployment Rate (UNRATE)

- Hint: Download the UNRATE in units as (‘Click on the “modify frequency tab to change to quarterly. Don’t download the UNRATE as “Percent change from a year ago)

       -  Real Gross Domestic Product (GDPC1)

- Hint: Download the GDPC1in units as (‘Percent Change from Year Ago.” The option is under the tab “edit graph”. Click on the “modify frequency tab to ensure that the data is quarterly)


a. Ensure that the real gdp is transformed into annualized growth rates (see hint above). Provide a scatter plot of the unemployment rate on the y-axis and the growth rate of real gdp on the x-axis (only 1 graph for the entire time period.).


b. Estimate a multiple regression model with the unemployment rate as your dependent variable and inflation and the growth rate of GDP as your explanatory variable (include an intercept term in your regression). Report the R-square and coefficients for each regression.


c. Interpret your explanatory variable (i.e. inflation and real GDP growth) coefficients from your multiple regression model  


d. Provide an intuitive interpretation of the p-values and R-Squares for the coefficients of the explanatory variables.

 

e. Why do you suppose the signs of the coefficients are what they are? (i.e. there is no one correct answer. I just want you to think through and research a bit online a theory that may explain your results)?



Chapter 14

(3) Visit the St. Louis Federal Reserve’s Fred database (https://fred.stlouisfed.org/). Download the variable as monthly for the Jan. 1, 1971 – Dec. 2019 time period (33pts).

         - Wilshire 5000 Total Market Index (WILL5000IND)

a. Generate a time-series graph of the stock index.


b. Generate a time-series graph with the data as well as a 5-month moving average.


c. Generate a time-series graph with the data as well as a 12month-day moving average.


d. Provide a 30-day forecast in excel (with a time-series graph) of the Wilshire 5000 Total Market Index.

e. Do you think that the forecasts of the stock market are meaningful? (i.e. there is no one correct answer. I just want you to think through and research a bit online a theory that may explain your results)?