Instructions for Assignment 3
Objec4ve and Files
The objec)ve is to analyze different types of household consump)on. The main regression op)ons that should be used are sta)c model, ARIMA, and structural VAR (SVAR) methods. The sta)c model assumes that real consump)on is a func)on of real income and rela)ve prices. The ARIMA method assumes that real consump)on is a func)on of past values of itself and errors. The SVAR approach is a combina)on of both methods, so current real consump)on is a func)on of past values of itself, real income and rela)ve prices.
This assignment is designed to:
Introduce you to some of the main regression approaches in )me series analysis
Show the effect of sta)onarity tests and implica)ons on coefficients
demonstrate your understanding of concepts through your wriHen interpreta)on of the results introduce you to transforming )me series data
The files for you to complete the assignment are listed below:
Consump(onIncome.xlsx: This is an Excel file with three sheets that have been downloaded from Sta)s)cs Canada. Income sheet shows several income sources for households. Expenditure Current is the nominal dollar expenditure by households. Expenditure Chained is the real dollar expenditure by households.
Tables: Sta)s)cs Canada table iden)fier is given in each sheet.
Assignment 3 template.docx: This file is aHached, and it is a guide to the format of your
submission. Your wriHen part should be from 2 to 5 paragraphs for each sec)on.
Data Manipula4on Instruc4ons
You will have to apply a few data manipula)ons to transform the data, including: rela)ve price (item price / total price) of consump)on expenditure; real income.
Other data manipula)ons may be applied.
You will want to include both tables and possibly graphs to describe the data and how it relates to your analysis.
Es4ma4on Instruc4ons
At a minimum, you must es)mate the sta)c model, ARIMA and SVAR for each of the detailed consump)on series. (Listed below.)
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Food and non-alcoholic beverages [C11]
Alcoholic beverages, tobacco and cannabis [C12]
Clothing and footwear [C13]
Housing, water, electricity, gas and other fuels [C14]
Furnishings, household equipment and other goods and services related to the dwelling and property [C15]
Health [C16]
Transport [C17]
Communica)ons [C18]
Recrea)on and culture [C19]
Educa)on [C21]
Food, beverage and accommoda)on services [C22]
Insurance and financial services [C23]
Miscellaneous goods and services [C24]
You may go beyond these simple es)ma)ons, if it is jus)fied. Be sure to test for sta)onarity.
Compare the results.
Submissions
You must summit:
your completed Assignment 3 Word document Do NOT upload the data with your submission.
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