Univariate Time Series Models

Abstract

The first class of time series models we investigate are univariate models called ARMA (autoregressive moving average) models. In the Appendix, we show how to gain significant insights into the dynamics of difference equations –the basis of time series econometrics – by simply solving them and plotting solutions over time. By stipulating a model based on our verbal theory and deriving its solution, we can note the conditions under which the processes we model return to equilibrium.