Question: Simulate the following AR( I) processes: Yt = 1 + 0.7Yt1 + t Yt = 1 0.7Yt1 + t for N(0. 1).

Simulate the following AR( I) processes:
Yt = 1 + 0.7Yt–1 + εt
Yt = 1 – 0.7Yt–1 + εt
for ε → N(0. 1). Comment on their differences: Contrast their time series and their autocorrelation functions. Comment on the covariance-stationary properties of both processes.

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