If the past three months of pcip are zero and pcsp-1 0 what

Question

Using the monthly data in VOLAT.RAW, the following model was estimated:

pcip^ =1.54 +.344 pcip_-1 + .074 pcip_-2 + .073 pcip_-3 + .031 pcsp_-1
           (.56)      (.042)            (.045)             (.042)          (.013)

n = 554, R² = .174, R² =.168,

where pcip is the percentage change in monthly industrial production, at an annualized rate, and pcsp is the percentage change in the Standard & Poor's 500 Index, also at an an- nualized rate.

(i) If the past three months of pcip are zero and pcsp_-1 =0, what is the predicted growth in industrial production for this month? Is it statistically different from zero?

(ii) If the past three months of pcip are zero but pcsp_-1 =10, what is the predicted growth in industrial production?

(iii) What do you conclude about the effects of the stock market on real economic activity?