In This Case, the Granger Causality Statistic Does Not Exceed $\widehat{\ln \mathrm { f }}$

Essay

In this case, the Granger causality statistic does not exceed the critical value, and hence the conclusion is that the change in the inflation rate does not Granger-cause the unemployment rate. $\widehat{\ln \mathrm { f }}$ _t = 0.05 - 0.31 ΔInf_{t-1
(0.14)(0.07)}
t = 1982:I - 2009:IV, R² = 0.10, SER = 2.4
a. Calculate the one-quarter-ahead forecast of both ΔInf_2010:I and Inf_2010:I (the inflation rate in 2009:IV was 2.6 percent, and the change in the inflation rate for that quarter was -1.04).
b. Calculate the forecast for 2010:II using the iterated multiperiod AR forecast both for the change in the inflation rate and the inflation rate.
c. What alternative method could you have used to forecast two quarters ahead? Write down the equation for the two-period ahead forecast, using parameters instead of numerical coefficients, which you would have used.