Econ 505: Economic Models and Forecasting Homework Assignment #2 jj espinoza Problem 1

Using the table above we can run the correlelogram function on Eviews to obtain the following picture:

We can see from the Correlogram of the first difference that this data generating process for the series has a few possible candidates for models.

• 
  ARIMA(1,1,0)
  
• 
  ARIMA(1,2),1,0)
  
• 
  ARIMA((1,4,2),1,0)
  
• 
  ARIMA(1,4),1,0)
  

ARIMA((1,4,2),1,0)

ARIMA(1,4),1,0)

ARIMA(1,2),1,0)

ARIMA(1,1,0)

The model which had the highest adjusted R-square where all the regressor’s estimated parameters where statistically significant is the ARIMA(1,4),1,0). This model is also the one with the lowest AIC score from the models whose regressors are statistically significant.