ch14-2 - Chapter 14 Introduction to Time Series Regression...

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Unformatted text preview: Chapter 14 Introduction to Time Series Regression and Forecasting (Part 2) Inflation vs. Unemployment Rate Forecasting with Additional Predictors Including the first lag of the unemployment rate: [ Inf t = 1.28 & 0.31 Inf t & 1 & 0.39 Inf t & 2 ( 0.53 ) ( 0.09 ) ( 0.09 ) + 0.09 Inf t & 3 & 0.08 Inf t & 4 & 0.21 Unemp t & 1 , ( 0.08 ) ( 0.09 ) ( 0.09 ) where R 2 = 0.21, improved from 0.18. Forecasting with Additional Predictors [ Inf t = 1.30 & 0.42 Inf t & 1 & 0.37 Inf t & 2 ( 0.44 ) ( 0.08 ) ( 0.09 ) + 0.06 Inf t & 3 & 0.04 Inf t & 4 ( 0.08 ) ( 0.08 ) & 2.64 Unemp t & 1 + 3.04 Unemp t & 2 ( 0.46 ) ( 0.86 ) & 0.38 Unemp t & 3 & 0.25 Unemp t & 4 ( 0.89 ) ( 0.45 ) where R 2 = 0.34, improved from 0.34. The Autorgeressive Distributed Lag Model The autoregressive distributed lag model with p lags of Y t and q lags of X t , denoted ADL(p,q), is Y t = + 1 Y t & 1 + 2 Y t & 2 + + p Y t & p + 1 X t & 1 + 2 X t & 2 + + p X t & p...
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This note was uploaded on 11/20/2011 for the course ECONOMICS 220:322 taught by Professor Otusbo during the Fall '10 term at Rutgers.

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ch14-2 - Chapter 14 Introduction to Time Series Regression...

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