For this exercise, you will need to download quarterly Personal Consumption Expenditures: Chain-type Price Index (PCECTPI) from FRED. The variable PCECTPI is the price index for personalconsumption expenditures from the U.S. National Income and Product Accounts. In this exercise, you will construct forecasting models for the rate of inflation based on PCECTPI. For the analysis, youwill use the sample period 1963:Q1-2019:Q4, but data before 1963 may be used, as necessary, as initial values for lags in regressions.a. Compute the inflation rate, Infl, = 400 x [In(PCECTPI) - In(PCECTPI-1)]. What are the units of Infl? (Is Infl measured in dollars, percentage points, percentage per quarter, percentageper year, or something else? Explain.)b. Compute the first four autocorrelations of AInfl. Estimate an AR(2) model for AInfl. Present you results.c. Forecast AInfl2020:Q1, the change in inflation from 2020:Q1 to 2019:Q4.d. Forecast Infl2020:02, the change in inflation from 2020:Q2 to 2020:Q1 (Use an iterated forecast).e. Forecast Infl2020:22. the rate of inflation in 2020:Q2.

a. Compute the inflation rate, InflThe inflation rate is calculated as the quarterly change in the…

Answered: For this exercise, you will need to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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