Question: Consider two models: A: Y t = 0.9Y t 1 + 0.09Y t 2 + e t and B: Y t = Y t 1

Consider two models: A: Yt = 0.9Yt 1 + 0.09Yt 2 + et and B: Yt = Yt 1 + et 0.1et 1.

(a) Identify each as a specific ARIMA model. That is, what are p, d, and q and what are the values of the parameters, 's and 's?

(b) In what ways are the two models different?

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