Time Series Analysis: Method and Substance Introductory Workshop on Time Series Analysis

Approaches to Time Series Analysis

• ARIMA/Box-Jenkins
• Focused on single series estimation
• OLS
• Adapts OLS approach to take into account properties of time series (e.g. distributed lag models)
• London School of Economics (Granger, Hendry, Richard, Engle, etc.)
• General to specific modeling
• Combination of theory & empirics
• Minnesota (Sims)
• Treats all variables as endogenous
• Vector Autoregression (VAR)
• Bayesian approach (BVAR); see also Leamer (EBA)

Univariate Time Series Modeling Process

• ARIMA (Autoregressive Integrated Moving Average)
• Yt → AR filter → Integration filter → MA filter
• (long term) (stochastic trend) (short term)
• → εt
• (white noise error)
• yt = a1yt-1 + a2yt-2 + εt + b1εt-1 ARIMA (2,0,1)
• Δyt = a1 Δ yt-1 + εt ARIMA (1,1,0)
• where Δyt = yt - yt-1