Q2B. Which of the following are limitations of using Impulse Response Functions (IRFs) in time series analysis? i. IRFs are only valid for linear time series models. ii. IRFs assume that the underlying time series is stationary. iii. IRFs can provide information about the short-term dynamics of the relationship between variables, but they do not capture longer-term effects or other important aspects of the relationship. iv. IRFs depend on the specification of the model used to estimate the relationship between variables.

What conditions must non-linear time series models, such as vector autoregressive models, satisfy in order to use impulse response functions

4- The manager of Collins Import Autos believes the number of cars sold in a day(Q) depends on two factors: (1) the number of hours the dealership is open (H) and (2) the number of salespersons working that day (S ). After collecting data for two months (53 days), the manager estimates the following log-linear model: Q = aHbSc ----- a. Explain how to transform this log-linear model into a linear form that can be estimated using multiple regression analysis. b. How do you interpret coefficients b and c? If the dealership increases the number of salespersons by 20 percent, what will be the percentage increase in daily sales? c. Test the overall model for statistical significance at the 5 percent significance level.