options linesize=76 pagesize=76;

data use;
infile cards;
input time gnp houses unemp int_rate lines plastic;

/*
data comes from Gujarati "Basic Econometrics" ch.8 #32.
*/
cards;
  68 1051.8 1503.6 3.6 5.80 5.90 5873
  69 1078.8 1486.7 3.5 6.70 4.50 7852                              
  70 1075.3 1434.8 5.0 8.40 4.20 8189
  71 1107.5 2035.6 6.0 6.20 4.20 7497
  72 1171.1 2360.8 5.6 5.40 4.90 8534
  73 1235.0 2043.9 4.9 5.90 5.00 8688
  74 1217.8 1331.9 5.6 9.40 4.10 7270
  75 1202.3 1160.0 8.5 9.40 3.40 5020
  76 1271.0 1535.0 7.7 7.20 4.20 6035
  77 1332.7 1961.8 7.0 6.60 4.50 7425
  78 1399.2 2009.3 6.0 7.60 3.90 9400
  79 1431.6 1721.9 6.0 10.6 4.40 9350
  80 1480.7 1298.0 7.2 14.9 3.90 6540
  81 1510.3 1100.0 7.6 16.6 3.10 7675
  82 1492.2 1039.0 9.2 17.5 0.60 7419
  83 1535.4 1200.0 8.8 16.0 1.50 7923
;

title1 "Initial Regression Ignoring Autocorrelation"; 
title2 "First collect the residuals in the output data set err";
title3 "and call the residuals resid."; 
proc reg data=use;
model gnp = houses unemp int_rate lines plastic / acov dw spec;
output out=err r=resid;

data errors; set err;
resid1=lag1(resid); 

title1 "Now use the residuals in a second regression to test";
title2 "for autocorrelation of lag length 3 (I chose 3 arbitrarily)."; 
title3 " The LM test is formed with the R-squared of this regression."; 

proc reg data=errors;
model resid=  houses unemp int_rate lines plastic resid1 ;

data errors; set err;
e2=resid**2; e2_1=  lag1(e2);    

title1 "Now use the squared residuals e2 in a second regression to test";
title2 "for ARCH of lag length 3 (I chose 3 arbitrarily)."; 
title3 " The LM test is formed with the R-squared of this regression."; 

proc reg data=errors;
model e2 = e2_1 ;