CT6 Sept/Oct 2011 Q8 (iv) Time series

Discussion in 'CT6' started by Balvinder Singh, Aug 10, 2017.

  1. Can someone please explain how does the maths work in the solution of part (iv) of Q8.

    Thanks

    Balvin
     
  2. John Lee

    John Lee ActEd Tutor Staff Member

    You're more likely to get a reply if you include a screen shot of the question and solution (as well as including the topic area covered in the title)- as otherwise students have no idea what the question is about and then have to look it up before they can answer.

    We have:

    \((1-0.4B)Y_t = (0.1+0.9e_{t-1}+e_t)\)

    So we multiply both sides by the inverse of \((1-0.4B)\):

    \(Y_t = (1-0.4B)^{-1}(0.1+0.9e_{t-1}+e_t)\)

    We can then use a series expansion on the \((1-0.4B)^{-1}\) part using the formula given on page 2 of the Tables.
     
  3. Thank you.
     
    John Lee likes this.

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