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The following questions will refer to the simple auto-regressive time series model presented below: Yt= + pyt-1 + U a) If the auto-regressive coefficient

 

The following questions will refer to the simple auto-regressive time series model presented below: Yt= + pyt-1 + U a) If the auto-regressive coefficient is equal to 0.7, what do we know about the dependence between y, and yt-1 b) If the auto-regressive coefficient is >0 and 1, is there a long run equilibrium? Explain.

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