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AR(p) Autoregressive time series approach. The following data is British exports in the early 1800s. Figures are in millions of British pounds. (A historic note:

AR(p) Autoregressive time series approach. The following data is British exports in the early 1800s. Figures are in millions of British pounds. (A historic note: During this time there was no inflation, so there is no need to deflate the numbers to a constant price level. There always were price adjustments, but long run inflation did not become common until the 20th century, when Keynesian economics was introduced.) Export growth should be expected from 1820 to 1850. During this era, the industrial revolution created more productive industries. David Ricardo was a member of the Parliament at this time, and his theory of comparative advantage transformed public policy, increasing the openness of British trade.

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Use a few time series auto regressive lag models.

Check if the AR(p) model is improved with the data transformations with first differencing, squaring, and/or logging of data (or not). Use the results to identify which model would be the best for use in forecasting.

Once you have the best model, use it to forecast exports up to 1854. Explain your results.

Year 1820 1821 1822 Exports 36.4 36.7 1823 1824 1825 37 35.4 38.4 38.9 31.5 37.2 36.8 35.8 1826 1827 1828 1829 1830 1831 1832 1833 1834 1835 38.3 37.2 36.5 39.7 41.6 47.4 53.3 42.1 50.1 53.3 51.4 51.6 1836 1837 1838 1839 1840 1841 47.4 1842 1843 52.3 58.6 60.1 1844 1845 1846 1847 1848 1849 57.8 58.8 52.8 63.6 1850 71.4

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