missunderstandings in Eviews Guide formula

[audrkaba]

I'm trying to understand how did you get a free coefficient in formula (21.30), EViews 7 User’s Guide II, p. 100. In formula (21.29) this free coefficient is equal to 9.034790, but in formula (21.30) this coefficient becomes equal to 0.0063. How is this possible?

[EViews Glenn]

It's from the AR polynomial expansion. Take the second equation, substitute in for u, and expand the polynomial on the left-hand side

(1-.980243L - .964553L4 + .980243*.964553*L5)(y - .9034790) = (1+.52L)*(1-.98L4)e

I'm doing the left-hand side in high precision since I'll need it to get the result. The right, we'll just leave as is...Note the presence of the constant on the left-hand side which gets multiplied by the AR polynomial. Then multiplying through and carrying the terms over to the right-hand side, we have

y = c + .980243*y(-1) + .964553*y(-4) - .980234*.964553*y(-5) + (1+.52L)*(1-.98L4)e

where

c = (1-.980243-.964553+.980243*.964553)*.9034790

which is about c = 0.000632730177.

[audrkaba]

ok, now it's clear... but you should use 9.034790 instead of 0.9034790 in your answer :)

[EViews Glenn]

Oops , er, I meant to do that to see if you were paying attention.