Empirical Project

1. Empirical Project Title: Interest Rates and Economic Growth • Step 1: Get an empirical paper on interest rates and economic growth. A paper that relates interest rates at different maturities with some measure of economic growth in different countries. Causality can go in any direction. • Step 2: Try to replicate that paper. To do that you have to get the data, for instance from the data-base HIS Global Insight (14-04-10 you should hand in a piece of paper with the title of the paper you are going to replicate, a brief description of your empirical project, and a description of the data you will be using). • Step 3: Find the best univariate model for the two variables of step 2, having in mind the paper of step 1 and a forecasting criteria (5-05-10 you should hand in a piece of paper the best univariate model you have obtained). • Step 4: If any of the variables have a trend, decompose that variable into a trend and a cycle (for instance, Beveridge-Nelson decomposition). • Step 5: Construct the best corresponding bivariate VAR model and the IRFs derived from it. • Step 6: Analyze Granger-causality, as well as cointegration. If possible carry on the Gonzalo-Granger permanent and transitory decomposition of both variables. • Step 7: Conclusions. You must hand in the project (No More than 3 pages) the day of the final exam. Remember that Science is Summary.

2. Some Hints • Use JSTOR • Use the NBER working papers data-base • Use Google and Google-Scholar • Use Economic Letters, Applied Economics, etc. • See the book by Kerry Patterson (2000): “An introduction to Applied Econometrics, a time series approach” Alternative Project: Global Warming Follow the same previous steps but between C02 and Temperature and/or between GDP and C02.