a) Consider a model for firm profitability in a particular industry (say, automobile), where the cross-section observations are at the country level. There are T months of data for each country. Firm...

Extracted text: a) Consider a model for firm profitability in a particular industry (say, automobile), where the cross-section observations are at the country level. There are T months of data for each country. Firm profitabilityt = a + B,Inventory turnover; + B,COVID_19 pandemicį, + Z: + ejt The variables in Zt are other factors affecting firm profitability, and Covid_19 pandemic is a dummy indicator equal to one if the lockdown was eased in-country i at time period t. You need to explain how you would estimate this model; be specific about the assumptions/models you are making. (200 words) b) Let's suppose that you have a set of time-series variables, and you want to model the relationship between them Read the situations given below and answer the questions. a) Explain the statistical test if the linear combination (of time-series variables) is I(0). b) Which statistical test can be applied if all the series are integrated of the same order I(1). Justify your answer (200 words)