1.Please make sure you know how to use the STATA.
2.
Question:
Recently, some economists have suggested that wage growth may not have the same sensitivity to output as before. In this exercise you are given a raw dataset collected on compensation of U.S employees, output and productivity to check if this claim is true. The data is labeled “Macro.dta”.
- Generate a quarterly time variable for your time series data starting from 1947q1.
- Check/Test if your key time series variables are stationary.
- Calculate real compensation as compensation/PCE. Short run output gap is already computed from another data source as the percentage change in real current GDP to the potential real GDP estimated in the same quarter in the previous year.
- Generate a new variable for the growth rate of real compensation as
- Generate a new variable for the growth rate of productivity in the same way.
- Estimate the following equation:
- Create a dummy variable with the value of 1 from 2007Q4 until 2014Q2 and 0 otherwise. You can call this “recession dummy”. Now run a new version of the equation:
- Does your regression support the view that the sensitivity of wages to short-run output has changed? What does it mean? Summarize your findings in a maximum of 1 page (single spaced). You are also required to submit the do-file and results tables.
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