Introduction to Econometrics 3rd Edition by James Stock, Mark Watson

تمرين 16

Suppose that Y t follows the AR(1) model Y t = ß 0 + ß 1 Y t -1 + u 1.
a. Show that Y t follows an AR(2) model.
b. Derive the AR(2) coefficients for Y t as a function of ß 0 and ß 1.