1. Construct a multiple regression using CPI, as a measurement of inflation, how US inflation from 1965 to 2020 is influenced by capacity utilization, M1, M2, Unemployment.
Reshape the data as yearly data by averaging 12-month data for each year from 1965 (1967) – 2020. You can utilize the “Subtotal” or “Pivot” table function in Excel for easy yearly average calculation.
2. Write down the estimated regression model equation. Using the model equation, estimated the CPI value using the 2021 January value for all independent variables. Then, compare and discuss the actual 2021 Jan CPI data with the estimated CPI.
3. Discuss R^2 and Adj R^2.
4. Do the overall model test and individual t-test. Interpret the result.
5. Discuss multicollinearity and collinearity using the appropriate outputs.
6. Do all assumption tests and error analyses. When you discuss, refer to which output you are using to analyze for which assumption.
7. Analyze the residual to discuss unusual observations, outliers, and high leverage value.
8. Based on your analysis, would you suggest a different model? If yes, show your new model in an excel file and copy and paste it into your answer paper.
All reshaped data and outputs should be submitted in excel files
Label your tap/sheet appropriate name.
For the answer to the above questions, copy and paste the appropriate outputs in your answer section so that I can see which output you used to analyze what.
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