Determining Univariate Characteristics

You are requested to estimate a household consumption function for South Africa.
The theoretical specification of household consumption (C) may be specified as:

     
C  f (Yd or Yde , W , i , π or π e )
where Yd  disposable income
Yde  expected disposable income
W  wealth (suitably proxied by M3 money supply)
i  short - term interest rates
π  inflation rate
π e  expected inflation rate

Data provided in Practical 1 data.xls

Variable name Description
RCONSt Total final consumption expenditure by households at constant 2000
prices in R millions
NYDt Disposable income of households at current prices in R millions
CPIt Total consumer prices (Metropolitan areas): Price index 2000 = 100
(Seasonally adjusted)
RYDt Disposable income of households at constant 2000 prices in R millions
NM3t M3 Money Supply at current prices in R millions
RM3t M3 Money Supply at constant 2000 prices in R millions
INFLt Inflation rate
NRATEt Nominal rate on 3-month trade financing: South Africa
RRATEt Real rate on 3-month trade financing: South Africa

Q1 Generate the following series: RYD (i.e. deflate NYD); RM3 (i.e. deflate NM3);
INFL (i.e. the percentage change in CPI); and RRATE.

Q2 Where possible, generate the logs of all variables.

Q3 Determine the univariate characteristics of LRCONS, LRYD, LRM3 and RRATE.

Show the required graphs and correlograms, and complete the table below for the unit
root tests. Draw conclusions on the order of integration for each of the above series.

1
 Series Model ADF
Lags ττ, τμ, τ
LRCONS Trend & Intercept
Intercept
None
ΔLRCONS Trend & Intercept
Intercept
None
*(**)[***] Statistically significant at a 10(5)[1] % level