Orders of integration


Orders of integration

How many diffs do you need to do to get a stationary process?

If something is first order integrated it is \(I(1)\).

Trend stationary

If we can remove the trend as a function, eg linear or non-linear growth, and the rest is stationary, then the process is trend stationary

We can model the process as:

\(y_t=\mu_t +f(t)+\epsilon_t \)

Cyclical fluctuations

We can have shocks having effects over time.

This is separate to trends.