Near Unit Root Processes Gauss file(s) unit_nearplot.g Matlab file(s) unit_nearplot.m Consider the AR(1) model yt = yt1 + vt , vt iid N(0, 2

Near Unit Root Processes Gauss file(s) unit_nearplot.g Matlab file(s) unit_nearplot.m Consider the AR(1) model yt = φyt−1 + vt , vt ∼ iid N(0, σ2 ).

(a) Simulate a unit root process with parameters φ = 1 and σ 2 = 0.1 for a sample of size of T = 200.

(b) Repeat part

(a) for a near unit root process with φ = 0.99.

(c) Repeat part

(a) for a near unit root process with φ = 0.95.

(d) Plot the simulated series in parts

(a) to

(c) and compare their time series properties.

(e) For parts

(a) to

(c) compute the ACF and the PACF and compare their values.