Analyzing Data Series with DF Tests: Exchange Rate, CPI Index, and M2 Money Supply

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This homework assignment focuses on applying Dickey-Fuller (DF) tests to evaluate the stationarity of three key monthly data series: Exchange Rate, CPI Index, and M2 Money Supply, using at least 10 years of historical data. You will be asked to graph each data series, determine the type of random walk (RW) they exhibit, and conduct model selection based on the Akaike Information Criterion (AIC) and Schwarz values to choose the appropriate time lag for the tests. This exercise will deepen your understanding of financial data analysis.

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May 04, 2026

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Analyzing Data Series with DF Tests: Exchange Rate, CPI Index, and M2 Money Supply

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Unit Root Test-An Example

Homework • Apply the DF tests on the following three data series • Exchange rate • CPI index • M2 money supply • Monthly data • 10-year data at least • Q: • Type of RW? (Graph the data series) • Selection on time lag? (Use AIC and Schwarz value )