Using your results from Eviews answer the following questions:

a. Use the augmented Dicky-Fuller (ADF) test to see whether log(Yt) has a unit root. In so

doing, write down the unit root test equation for log(yt), the null and alternative hypotheses,

and the decision rule. State your conclusion.

b. Given your conclusion in Question 1, what can you say about the dynamic behavior of

log(1.). Explain clearly.

c. Specify and estimate the univariate model for the exchange rate. Is your model "moving

average", "autoregressive", "random walk without drift", "random walk with drift",

"integrated moving average", or "integrated autoregressive"? Explain clearly.

d. Is the estimated univariate model dynamically stable? Explain clearly.

e. Is the residual series of the univariate model white noise? Explain clearly.

f. Is the trend in log(x), as shown above, deterministic or stochastic? Explain clearly.

g. Use your univariate model estimates to forecast the exchange rate for 2000.01-2000.12.

Find the ME, MAE, and MAPE for the forecast period. Use these results to make some

conclusions about the performance of the univariate model in forecasting exchange rates.