Consider again the US monthly leading index of question 2.

(a) Fit a linear AR(6) model to xt and refine the model by removing the estimates that are not statistically significant at the usual 5% level. Write down the fitted model.

(b) Fit a NAAR model

to the data, where f????(xt−????) is a spline function. You may use the gam package.

(c) Perform an analysis of variance to confirm that the NAAR model is significantly different from the linear AR(6) model.

Transcribed Image Text:

X = Co+fi (_) +f3_3)+f(_4) + Joo) tn