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Unformatted text preview: time series x t = 01 + 11 z t + 1 t w t = 02 + 12 z t + 2 t z t = t X i =0 z t i = t X i =0 ( z + 1 t ) (6) B. This common factor yields a structural relationship z t = w t 02 12 2 t (7) In fact we could assume that 02 0 and 12 1. C. At the least x t = 01 02 12 + 11 12 w t + [ 1 t 12 2 t ] x t = + 1 w t + t (8) The critical point is that the variance in Equation 8 is bounded (or the error is stationary). 2...
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This note was uploaded on 07/15/2011 for the course AEB 6180 taught by Professor Staff during the Spring '10 term at University of Florida.
 Spring '10
 Staff

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