Suppose that Yt follows a stationary AR(1) model, Yt = 0 + 1Yt-1 + ut. a. Show
Question:
a. Show that the h-period ahead forecast of Yt is given by Yt+h|t = μY + β1h(Yt - μY), where μY = β0/(1 - β1).
b. Suppose that Xt is related to Yt by
where |δ|
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X, = E08 Yila %3D
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Related Book For
Introduction to Econometrics
ISBN: 978-0133595420
3rd edition
Authors: James H. Stock, Mark W. Watson
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