ECON 483: Forecasting

The data for the homework assignment is available in EasyReg (former) default format (*) and in Excel CSV format (**). This data file contains an artificial time series, which you may treat as an annual time series starting from year 1. The time series is an ARIMA(p,r,q) process. Note that r = 0 means that the process is stationarity, and r = 1 that the process is a unit root process. In the latter case you have to difference the time series to make it stationary.

1. Determine r, using the Augmented Dickey-Fuller test as well as the Breitung test.
2. Figure out what p and q are.
3. Re-estimate the model via the ARIMA module, using only the first 490 observations, and forecast the last 10 observations, one-step ahead as well as recursively. Comment on the results.

(*) Click on the link, and save the file as a text file on your hard disk via the "Save as .." option of your web browser. Note that Internet Explorer will try to save the file as a web page (*.htm format). You have to overrule that.

(**) If you use Internet Explorer and you click on the link the file will be automatically imported in Excel, provided that you have installed Excel. Then use the "Save as .." option of Excel to save the file on your hard disk. Netscape and Mozilla Firefox will display the file as a text file. Therefore, if you use Netscape or Firefox follow the procedure under (*).