The model y_t = β₀ + β₁y_{t -}₁ + ε_t is known as a(n) ________.

Question

Quizplus · Accepted Answer

The given model is an autoregressive model as it includes a lagged dependent variable yS1U1B1(t-1) as one of the predictors, along with an error term εS1U1B1tS1U1B0. The other predictor terms are simply cross products of the lagged dependent variable and a constant (S1U1B10S1U1B0) or another variable (S1U1B11S1U1B0). The model does not show any indication of linear or exponential trends, nor does it involve any quadratic terms.

The Model Yt = β0 + β1yt - 1

The Model Y_t = β₀ + β₁y_{t -}₁