14.7 Suppose that Yt follows the stationary AR(1) model Yt = 2.5 + 0.7Yt - 1 +...

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14.7 Suppose that Yt follows the stationary AR(1) model Yt = 2.5 + 0.7Yt - 1 + ut, where ut is i.i.d. with E1ut2 = 0 and var1ut2 = 9.

a. Compute the mean and variance of Yt. (Hint: See Exercise 14.1.)

b. Compute the first two autocovariances of Yt. (Hint: Read Appendix 14.2.)

c. Compute the first two autocorrelations of Yt.

d. Suppose that YT = 102.3. Compute YT + 10T = E(YT + 1 0YT, Yt - 1, c).

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Introduction To Econometrics

ISBN: 9781292071367

3rd Global Edition

Authors: James Stock, Mark Watson

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Question Posted: Oct 26, 2024 01:00 AM

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14.7 Suppose that Yt follows the stationary AR(1) model Yt = 2.5 + 0.7Yt - 1 +...

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Introduction To Econometrics

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