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For each of the following auto regressive processes below: 3 (a) y = y-1 + (b) y=-1 + (c) Yt=yt-1+Yt-2 + Et (d) yt

For each of the following auto regressive processes below: 3 (a) y = y-1 +  (b) y=-1 +  (c) Yt=yt-1+Yt-2 + Et

For each of the following auto regressive processes below: 3 (a) y = y-1 + (b) y=-1 + (c) Yt=yt-1+Yt-2 + Et (d) yt = Yt-1+Yt-2 + Et 16 (e) t = 25t-1+ yt-2 + Et (f) ytt-1 - Yt-2 + Et (i) Compute the roots of the inverse polynomial (ii) Compute the roots of the characteristic equation (iii) Corroborate the relationship between (i) and (ii) (iv) Based on your results, determine whether each process {y} is stationary? (v) Given the characteristic roots, describe the adjustment process of each {y} (i.e.: converges, diverges, etc).

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To analyze the given auto regressive processes we will compute the roots of the inverse polynomial and the characteristic equation for each process Lets go through them one by one a y y1 i Inverse pol... blur-text-image

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