Please solve the following problem using STATA.
The question is from 2.15APP ECONOMETRIC TIME SERIES 4E TLP by ENDERS.

The file QUARTERLY.XLS contains the U.S. money supply as measured by M1 (M1NSA) and as measured by M2 (M2NSA). The series are quarterly averages over the period 1960:1 to 2012Q4.

a. Reproduce the results for M1 that are reported in Section 11 of the text.

b. How do the three models of M1 reported in the text compare to a model with a seasonal AR(1) term with an additive MA(1) term?

c. Obtain the ACF for the growth rate of the M2NSA series. What type of model is suggested by the ACF?

d. Denote the seasonally differenced growth rate of M2NSA by m2t. Estimate an AR(1) model with a seasonal MA term over the 1962:3 to 2014:4 period. You should obtain m2t = 0.5412m2t-1+ ??t – 0.8682??t-4. Show that this model is preferable to (i) an AR(1) with a seasonal AR term, (ii) MA(1) with a seasonal AR term, and (iii) an MA(1) with a seasonal MA term.

e. Would you recommend including an MA term at lag 2 to remove any remaining serial correlation in the residuals?

When answering this question, please be sure to include the following aspects.

**Please use STATA codes and make sure to include them in the answer.

1. What is the economic question being asked and the data being used to address it.

2. What is the economic model being used and what are some limitations.

What is the time series specification being adopted to estimate the model?

3. What are the (parametric) results and what do they mean?

4. What is the justification of the time series model that is being adopted?


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