Practice question 2:Consider the ARIMA(1,1,0) model),0(~,)9.01)(1(2σNIDaaXBBttt=+-.The most recent 8 observations for 1989 to 1996 were )3.6,2.7,9.4,3.4,2.2,5.1,1.0,0(),,(9689-------=XX.(a)Write out the recursive formula for the tXvalues.(b) Derive the formulas for predictions for 1997 to 1999 in terms of previously observed values. (These may be expressed in terms of other predictions, as long as you describe how to calculate each term before you use it another formula.)
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