It should follow an essay format, which  means you must add an introduction, analysis and conclusion. You must also include the R  codes in the Appendix (the codes will not count towards the word limit). The word limit of the  text is 750. You should add tables as figures to avoid exceeding your word limit. You are  encouraged to use at least Wooldridge (2012) and Heiss (2016) in order to provide references  for your tests and rationale. Your task is to test the Okun’s Law (Okun, 1962), i.e., that if unemployment rates are stable,  real GDP grows at 3% annually. However, for each percentage point increase in the  unemployment rate, real GDP will grow by two percentage points less. Using the OKUN dataset that compiles data for the U.S. economy, please estimate the  following econometric model: ??????? = ?0 + ?1?????? + ?? where ?????? is the annual percentage change in real GDP, ????? is the change in the  annual unemployment rate and the subscript ? refers to the time period. First, you must test and address (if appropriate) heteroskedasticity and serial correlation. Be  specific about the steps you have taken and the reasoning behind the decisions you make on  how to proceed. You can also compare the models with and without heteroskedasticity and  serial correlation (if appropriate). Second, you must interpret the results of your final regression. You must mention the  coefficients, statistical significance, R-squared and F-statistics. Be precise and explain the  meaning and/or null hypothesis of each concept if necessary. Finally, you need to conclude if your results are in line with Okun’s La

It should follow an essay format, which 
means you must add an introduction, analysis and conclusion. You must also include the R 
codes in the Appendix (the codes will not count towards the word limit). The word limit of the 
text is 750. You should add tables as figures to avoid exceeding your word limit. You are 
encouraged to use at least Wooldridge (2012) and Heiss (2016) in order to provide references 
for your tests and rationale.
Your task is to test the Okun’s Law (Okun, 1962), i.e., that if unemployment rates are stable, 
real GDP grows at 3% annually. However, for each percentage point increase in the 
unemployment rate, real GDP will grow by two percentage points less.
Using the OKUN dataset that compiles data for the U.S. economy, please estimate the 
following econometric model:
??????? = ?0 + ?1?????? + ??
where ?????? is the annual percentage change in real GDP, ????? is the change in the 
annual unemployment rate and the subscript ? refers to the time period.
First, you must test and address (if appropriate) heteroskedasticity and serial correlation. Be 
specific about the steps you have taken and the reasoning behind the decisions you make on 
how to proceed. You can also compare the models with and without heteroskedasticity and 
serial correlation (if appropriate).
Second, you must interpret the results of your final regression. You must mention the 
coefficients, statistical significance, R-squared and F-statistics. Be precise and explain the 
meaning and/or null hypothesis of each concept if necessary.
Finally, you need to conclude if your results are in line with Okun’s Law