1)¶
- Read U.S. Industrial Production: Total Index (
IPB50001N) from FRED. - Resample/reindex the data to a quarterly frequency using the value for the last month of each quarter.
- Print the original data and compare it to the resampled/reindexed data to verify it is correct.
2)¶
- Why is this data not stationary?
- Use appropriate transformations to remove the non-stationarity and plot the series.
- Correctly and completely label the plot.
3)¶
- Plot the autocorrelation function of the transformed data.
- Is it stationary? Why or why not?
4)¶
- Conduct a unit root test of the transformed data.
- Is it stationary? Why or why not?
5)¶
If you were to pick a parsimonious AR model (i.e., the number of lags is less than 5) to fit the transformed data, what lag would you pick? Why?
6)¶
- Given your last answer, estimate an AR model given the transformed quarterly data.
- Interpret the results.