Question: For the data in Table:
(a) Estimate a regression of HS on y and RR.
(b) Estimate a VAR model with one lag. Compute the characteristic roots. Test for cointegration and estimate the cointegrating vectors, if any.
(c) What sense can you make of the multiple regression estimated in part (a)?
(d) Repeat the analysis with residuals from a regression of the raw data on quarterly dummies.
