# This is seasonally adjusted U.S. quarterly data going from the firs...

## Question

This is seasonally adjusted U.S. quarterly data going from the first quarter of 1959 to the second quarter of 2018. The variables are as follows:

MZM: The MZM Money Supply in \$billions (used to be M3)
M1: The M1 Money Supply in \$billions
M2: The M2 Money Supply in \$billions
TBILL3M: The Three Month Treasury Bill Rate in %
FEDFUNDS: The Federal Funds Rate in %
PRIME: The Prime Lending Rate in %
UNRATE: The Unemployment Rate in %
WLPART: The Female Labor Participation Rate in %
MLPART: The Male Labor Participation Rate in %
RGDP: Real GDP in \$billions
CPI: The Consumer Price Index

Using this data, develop a model among the following (choose one you like):

1. Estimate a Money Demand Function with one of the monetary aggregates as the dependent variable.
2. Estimate the Phillips Curve that relates unemployment to inflation.
3. Estimate Okun’s Law which relates real GDP to the unemployment rate.

Make sure to use a multiple regression model and include any variables you feel are appropriate. The paper should either be in Word or a pdf file and should have the following structure:

a. Title Page with name
b. Introduction
c. Explanation of the data and the model you selected
d. Statistical results and discussion of those results
e. Concluding remarks.

## Solution Preview

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Introduction
In this write-up, we are going to discuss about “Estimate Okun’s Law which relates real GDP to the unemployment rate”. Arthur M. Okun introduced the Okun’s law which is also called as "Okun's rule of thumb" because rather than a result derived from theory it is primarily an empirical observation. Okun’s law generally applied of the employment and output in US.
Okun’s law is an empirical observed relationship that relates the unemployment to losses in a country's production. Okun’s law suggests that the gap between an economy’s full employment output and states that with an increase of one point in the unemployment rate there will be a two percentage points of negative growth in real GDP....

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