Apply the same model sequence used in Example 6.2 to the extended velocity series (1869-1988) (e.g. Koop and Steel, 1994). This series is identified as non-stationary (with significant probability that \(ho>1\) ) by Bauwens et al. (2000). The data for this series are included in Exercise 6.2. odc.

Data from Example 6.2

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As an illustration of models capturing both trend and autoregressive dependence, one of the Nelson-Plosser series on the US economy is considered (Nelson and Plosser, 1982; Bauwens et al., 2000). This is the real GNP series, of annual observations over 1909 to 1988 (T = 80). Linear and non-linear AR representations are considered, respectively y = + pyt-1 +t + AY1 + $2y-2+u, y = pyt-1+p + (1 p)( + t) + $1yt-1 + $2y1-2+u