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Use the data set ChickEgg from lmtest Which order of integration do the variables have?

INSTRUCTIONS TO CANDIDATES
ANSWER ALL QUESTIONS

Assignment 2

Submissions must be made via Athena. The submission should be in the form of a script file that conforms to the requirements of script files of the term paper. Use the data set ChickEgg from lmtest. Answer the question of whether the chicken or the egg was first by performing the following analysis and answering the subquestions:

1. Which order of integration do the variables have?

2. Show that the variables are not cointegrated.

3. Use information criteria to specify a VAR model of an appropriate lag order.

4. Perform Ljung—Box and Jarque—Bera tests. What are the conclusions?

5. Perform Granger’s causality test. Do chicken Granger—cause eggs or eggs Granger -cause chicken?

6. So which was first, the chicken or the egg?

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