Introduction to Econometrics 3rd Edition by James Stock, Mark Watson

Exercise 1

These exercises are based on data series in the data files USIVIacro_QuarterIy and USMacro_Monthly described in the Empirical Exercises in Chapters 14 and 15. Let Y i = ln(GDT)), R i denote the 3-month Treasury bill rate, and
and
denote the inflation rates from the CPI and Personal Consumption Expenditures (PCE) Deflator, respectively.
Using quarterly data from 1955:1 through 2009:4, estimate a VAR(4) (a VAR with four lags) for Y t and R t
a. Does R Granger-cause Y Does Y Granger-cause R
b. Should the VAR include more than four lags