7. We ran a Vector-autoregresive model with two variables: with dtrade (change in trade balance), doilpr (change in oilpr) with one-lag and the result is as follows: dtrade 1st Lag of Trade Balance 1st Lag of Oil Price doilpr 1st Lag of Trade Balance 1st Lag of Oil Price Coef 0.48 275 0.04 1291 0.02 2939 0.35 7591 Std. Err 0.04 2789 0.02 1304 0.09 2198 0.04 5904 Z- statistic 11. 28 1.9 4 0.2 5 7.7 9 P>| zl 0 0.0 53 0.8 04 0 a) What can you infer from the result? b) Can you say anything about the long-run equilibrium value for change in trade- balance given the result?
Based on the provided output of the Vector Autoregressive (VAR) model with two variables (dtrade and doilpr) and one lag, the following inferences can be made:
a) Inferences from the Result:
1. Coefficients (Coef):
- The coefficient for the 1st lag of dtrade (change in trade balance) is 0.48, indicating a positive relationship between the change in trade balance and its past value. This suggests that the trade balance is influenced by its own past values.
- The coefficient for the 1st lag of doilpr (change in oil pricing) is 0.02, suggesting a positive but weak relationship between the change in oil pricing and the change in trade balance.
2. Statistical Significance (P>|z|):
- The p-value for the coefficient of the 1st lag of dtrade is very low (close to 0), indicating that it is statistically significant.
- The p-value for the coefficient of the 1st lag of doilpr is relatively high (0.8), indicating that it is not statistically significant at conventional levels (such as 0.05).
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