# 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 &amp; 0.31 Inf t &amp; 1 &amp; 0.39 Inf t &amp; 2 ( 0.53 ) ( 0.09 ) ( 0.09 ) + 0.09 Inf t &amp; 3 &amp; 0.08 Inf t &amp; 4 &amp; 0.21 Unemp t &amp; 1 , ( 0.08 ) ( 0.09 ) ( 0.09 ) where R 2 = 0.21, improved from 0.18. Forecasting with Additional Predictors [ Inf t = 1.30 &amp; 0.42 Inf t &amp; 1 &amp; 0.37 Inf t &amp; 2 ( 0.44 ) ( 0.08 ) ( 0.09 ) + 0.06 Inf t &amp; 3 &amp; 0.04 Inf t &amp; 4 ( 0.08 ) ( 0.08 ) &amp; 2.64 Unemp t &amp; 1 + 3.04 Unemp t &amp; 2 ( 0.46 ) ( 0.86 ) &amp; 0.38 Unemp t &amp; 3 &amp; 0.25 Unemp t &amp; 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 &amp; 1 + 2 Y t &amp; 2 + + p Y t &amp; p + 1 X t &amp; 1 + 2 X t &amp; 2 + + p X t &amp; 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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