
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:We try to predict the unemployment (unem) with an AR(1) model and VAR(1) (unemployment and inflation). Figure 1 shows the predication results based on AR(1) and the Figure 2 shows that for VAR(1). The RMSE and
MAE for AR(1) are 0.48 and 0.54, while those for VAR(1) are 0.58 and 0.52. Which one of the following statements is correct:
10
civilian unemployment rate, %
амми
um
1950
O b.
O c.
O d.
1960
1950
num
True unemployment rate before 1996
Confidence interval
True unemployment rate after 1996
1970
1980
1948 through 2003
1960
1970
1980
1948 through 2003
True unemployment rate before 1996-
Confidence interval
True unemployment rate after 1996
1990
AR(1) performs better than VAR(1) because it has smaller RMSE
VAR(1) performs better than AR(1) because it has smaller MAE
We cannot tell which one performs better
Forecast based on AR(1)
Confidence interval
1990
2000
2000
We try to predict the unemployment (unem) with an AR(1) model and VAR(1) (unemployment and inflation). Figure 1 shows the predication results based on AR(1) and Figure 2 shows that for VAR(1). The RMSE and MAE
for AR(1) are 0.48 and 0.54, while those for VAR(1) are 0.58 and 0.52. Which one of the following statements is correct:
Select one:
O a. VAR(1) performs better than AR(1), because it contains additional information of inflation.
Forecast based on VAR(1)
Confidence interval
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