Economics Homework Help

• 1. Consider a 2-state Markov chain and a random variable y_t = y^′x_t, where y = (2, 5)^′. Suppose it is known that E(y_t+1|x_t) = (3, 4).

• 2. Business cycle facts. Download the following aggregate United States data from the FRED database from 1947-2020, quarterly, if available. You can use the following Python API for FRED data.

(a) Find a transition matrix consistent with the conditional expectations.

(b) Find a stationary distribution for the Markov chain x_t.

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