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The use of mathematical methods, especially statistical, in order to analyze economic phenomena, understand the economic relations between them, and develop economic theories. A subset of economics.

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Lagged Residual as Independent Variable

This is a MA(1) model. if you keep the lagged time-series observation as well as the lagged residual, it would be an ARMA(1, 1) model. Basically, p lagged observations and q lagged residuals will form …
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