ECON 706 Midterm: 706_aug2014
Document Summary
Macroeconomic propagation mechanisms convert serially-uncorrelated im- pulses, or shocks (e. g. , technology shocks), into serially-correlated aggre- gates (e. g. , real consumption growth). With that as background, suppose for now that you know that u. s. real consumption growth, xt, follows a covariance stationary ar(2) process with weak white noise innovations: provide a detailed characterization of xt via its wold decomposition. Now suppose that you know that xt follows a covariance stationary. Ar(2) process with conditionally-gaussian arch(6) innovations: write down the full conditionally-gaussian ar(2) arch(6) process for xt. Now suppose that you know only that xt follows a covariance station- ary process, but you decide to t a conditionally-gaussian ar(2) .
