# Essential econometric procedures and forecasting

Briefly explain the research question you are going to ataress 2Explain the reason for your choice of tne mow? why bonus yields from 82-2008? 3. Perform and carefully explain any necessary aata transformations – e.g. logs, lags, aifferencing. . Carry out unit root tests to oaterrnine the order of integration of me variables,( imbue a aiscussion )of the form of the test.
Testing for Unit Roots,A test for me oraer of integration is a test for me number of unit roots, ana follows tnese steps: Step 1 – Test Yt to see if it is stationary. If yes, then Yt – 1(0); if no, then Yt – 1(n); n > 0. Step 2 – Take first differences of Yt as LYt = Yt – Yt-1 , ana then test inkYt to See if it is stationary. If yes, me vt – 1(1); if no, men vt – 1(n); n > 0. Step 3 – Take secona differences of Yt as a2Vt = Lae ne augmented Dickey-Funer (ADF) test for unit roots The Pniilips-Perron (PP) test 5. Estimate a long-run relationsnip(s) for cointegration. 6. Estimate a secona-oraer error correction modei (ECM). 7. Undertake appropriate aiagnostic tests. Outliers Non-linearity Municollinearity fb,utocornaiation
Heteroscedasticity
ana finally analysing the restarts. please make sure to use e views for an testing. tnis is me requirements for question 1-

Aims The purpose of this assignment is to test your ability to perform some essential econometric procedures and forecasting. You will need to employ me quantitative techniques covered in the module to estimate two stanaara economic relationships from time series aata using (1) tne cointegration metnoaotogy, and (2) ARIMA modelling. Botn will involve some basic diagnostic testing and discussion of the procedures used and any encountered problems, interpretation and analysis of me results, and project writing up.