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Suppose the rate of inflation in year t, It, is to be modelled by the AR(1) It - 0.0182 = 0.42(It−1 − 0.0182) + 0.042Zt - where Z₁~N[0,1] The current (period 0) annual rate of inflation is 5.3% (1 = 0.053). b) Find the distribution of I₁. Provide the necessary calculation.

Suppose the rate of inflation in year t, It, is to be modelled by the AR(1) It - 0.0182 = 0.42(It−1 − 0.0182) + 0.042Zt - where Z₁~N[0,1] The current (period 0) annual rate of inflation is 5.3% (1 = 0.053). b) Find the distribution of I₁. Provide the necessary calculation.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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Suppose the rate of inflation in year t, It, is to be modelled by the AR(1) It = 0.0182 = 0.42(It-1 – 0.0182) + 0.042Zt where Z~N[0,1] The current (period 0) annual rate of inflation is 5.3% (1 = 0.053). b) Find the distribution of I₁. Provide the necessary calculation.
Transcribed Image Text:Suppose the rate of inflation in year t, It, is to be modelled by the AR(1) It = 0.0182 = 0.42(It-1 – 0.0182) + 0.042Zt where Z~N[0,1] The current (period 0) annual rate of inflation is 5.3% (1 = 0.053). b) Find the distribution of I₁. Provide the necessary calculation.
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