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Firstly, download the excel file called " HK_exports & imports_monthly data "
from the "Sample Data" of Econ3600 homepage.
Second, open EVIEWS program in this way: click "File", "New", "Workfile"
commands, then in the "Workfile Range", choose "Monthly" and type 1980.01 for
the "Start observation" and 2000.07 for "End observation" in the dialogue
box. Then, we will get a Workfile, and import data from the excel file to generate the
following result: (remember "B9" for upper left data cell)
Double click "export" to check the import data is consistent with Excel file, and
choose "View", "Line" to get a general idea about the time series whether it is level
stationary or no. Also, choose "View", "Correlogram" to identify tentative pattern
and model components (i.e. ARIMA p, d, q) The resulting graphs are:
From the line graph, you can see that the time series is likely to have upward trend
and seasonal cycles, which implies level non-stationary. Also, in the graph of
correlogram, the ACFs is suffered from linear decline and there are significant
seasonal spikes of PACFs at lags 1 and 13, that is a 12-period seasonality. Also,
checking the first-difference of the lnexport, it shows as:
This graph shows that the firs-difference series has a problem of variance nonstationary. Therefore, the series needs to take the logarithm transformation to become
variance stationary. In order to generate a logarithm transformation of the original
series, i.e., Log (export), simply click "GENR" and type "lnexport = Log(export)".
The line graph of LNEXPORT and its correlogram are shown as follows:
As shown above, the logarithm transformation still cannot solve the problem of
variance non-stationary. And from the graph of correlogram of "lnexport", we still
find a significant seasonal spike of PACF appears at period 13, it implies the series
may be needed to take the 12-period seasonal difference to achieve the stationary.
To examine whether the seasonal- difference can generate stationarity or not, click
"GENR", type "d12lexport = lexport - lexport(-12)". Then, get a new created
series--"d12lexport" in the "Workfile", and use it to plot a line graph to see whether
it becomes stationary or not. The result is:
Residual diagnostics:
As you can see that the 12th-order difference series has not achieved white noise
because there are still has significant spikes for both ACFs and PACFs at lags 12 and
25, respectively. Then, by guessing to add AR(12) or MA(12) seems suitable. Which
one is the best? It will need to compare their results of BIC, SEE and Adjusted R2.
First, we try to add AR(12) to the previous regression equation, the result is:
Residual diagnostic:
This result is not improved than before in terms of BIC, SEE and Adjusted R 2, also
there is still a significant spike at lags 12th of ACFs and PACFs, which means the
residual of this model has not achieve white noise. (You are supposed to have ability
to check it yourself)
Second, we can try another possibility whish is to add MA(12) to the previous
specification, the result is:
Residual diagnostic:
This result seems better than the previous one and the residuals also achieve white
noise, however, the coefficients of MA(1) and MA(3) are not significant and the AR
roots is also 1.00 which is not satisfied the invertibility condition. Therefore, we may
try to drop the MA(1) and MA(3) in the model as follow:
Residual diagnostic:
Thus, there is one significant spike of ACFs and two significant spikes of PACFs, we
may suspect the d12dlexport has AR(2) and MA(1), then we can try to estimate the
ARIMA as
Residual diagnostic:
or we can try
We can summary the result for several trials and errors as in the following table:
Q-test
(No significant
Invertibility
ACFs or
PACFs)
BIC
Adjusted R2
SEE
12
-2.361
0.681
0.0700
OK
12
-2.485
0.723
0.0653
OK
(0,0,0)1,1,(3,1,3) (1,0,1)12
-2.625
0.776
0.0596
OK
(0,0,0)1,1,(3,1,3) (1,0,1)
12
-2.455
0.730
0.0655
OK
(0,0,0)1,1,(3,1,0) (0,0,1)
12
-2.687
0.765
0.0601
OK
ARIMA model
(0,0,0)1,1,(2,1,3)
(0,0,0)1,1,(3,1,3)
12
12
12
(0,0,0)1,1,(2,0,0) (0,0,1)12
-2.584
0.735
0.0639
OK
(0,0,0)1,1,(1,1,3)
12
-2.354
0.6716
0.0719
OK
12
-2.710
0.573
0.0600
OK
(0,1,0)0,1,(2,1,1)12(0,0,1)12
-2.699
0.569
0.0600
(0,1,0)1,1,(2,1,0)12(0,0,1)12
-2.682
0.569
0.0603
12
12
The End