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ECON321 Economic Analysis Tutorial 5 Time series issues: Stationarity

Tut5 stationarity

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Explains how to do an ADF test of the stationarity of data in EViews

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ECON321Economic Analysis

Tutorial 5

Time series issues: Stationarity

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Introduction

• The lecture on chapter 16 explains that it is important to make sure that your data is stationary before you estimate a regression model – if your data are non-stationary the results are spurious.o A first step is to plot your variables. If the series are

trending upward or downward over time, you have to be concerned.

o The next step is to do the ADF test for every variable.

• The example is of the effects of inflation and budget deficits on interest rates.

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Once you are estimating with stationary time series the next concern is structural breaks. Save your workfile and continue…