These data give monthly figures for standard variable interest rates in Australia over a 4-year period. Use the data to develop an autoregressive model with a 6-month lag. Discuss the strength of the model.
Period …………………………………. Standard variable
interest rate (%)
(Year 1)
Jan. …………………………………………………….. 8.05
Feb. ……………………………………………………. 7.55
Mar. …………………………………………………… 7.30
Apr. ……………………………………………………. 6.80
May ……………………………………………………. 6.80
June ……………………………………………………. 6.80
July …………………………………………………….. 6.80
Aug. ……………………………………………………. 6.80
Sept. …………………………………………………… 6.55
Oct. ……………………………………………………. 6.30
Nov. ……………………………………………………. 6.30
Dec. ……………………………………………………. 6.05
(Year 2)
Jan. ……………………………………………………. 6.05
Feb. ……………………………………………………. 6.05
Mar. …………………………………………………… 6.05
Apr. ……………………………………………………. 6.05
May ……………………………………………………. 6.30
June ……………………………………………………. 6.55
July …………………………………………………….. 6.55
Aug. …………………………………………………… 6.55
Sept. ………………………………………………….. 6.55
Oct. ……………………………………………………. 6.55
Nov. …………………………………………………… 6.55
Dec. ……………………………………………………. 6.55
(Year 3)
Jan. ……………………………………………………. 6.55
Feb. ……………………………………………………. 6.55
Mar. …………………………………………………… 6.55
Apr. ……………………………………………………. 6.55
May ……………………………………………………. 6.55
June ……………………………………………………. 6.55
July …………………………………………………….. 6.55
Aug. …………………………………………………… 6.55
Sept. ………………………………………………….. 6.55
Oct. ……………………………………………………. 6.55
Nov. ……………………………………………………. 6.80
Dec. ……………………………………………………. 7.05
(Year 4)
Jan. …………………………………………………….. 7.05
Feb. ……………………………………………………. 7.05
Mar. ……………………………………………………. 7.05
Apr. ……………………………………………………. 7.05
May ……………………………………………………. 7.05
June ……………………………………………………. 7.05
July ……………………………………………………… 7.05
Aug. ……………………………………………………. 7.05
Sept. …………………………………………………… 7.05
Oct. ……………………………………………………. 7.05
Nov. ……………………………………………………. 7.05
Dec. ……………………………………………………. 7.05
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