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2. Suppose that we have an AR(2) model as follows: yt = 0.1 + 1yt1 + 2yt2 + ut, where ut follows a white noise
2. Suppose that we have an AR(2) model as follows: yt = 0.1 + 1yt1 + 2yt2 + ut, where ut follows a white noise process with mean zero and variance 2 u = 0.2. Please compute the following: (a). Assume that 1 and 2 take values that make the model stationary. What is the mean of yt? (b). Compute E[yt+1|t]. (c). Compute E[yt+2|t]
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Mathematics for Economics and Business
Authors: Ian Jacques
9th edition
129219166X, 9781292191706 , 978-1292191669
