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1. Consider the following time series data.

Week 1 2 3 4 5 6

Value 18 13 16 11 17 14

a. Construct a time series plot. What type of pattern exists in the data?

b. Develop the three-week moving average forecasts for this time series. Compute MSE and a forecast for week 7.

c. Use α = 0.2 to compute the exponential smoothing forecasts for the time series. Compute MSE and a forecast for week 7.

2. The following time series shows the sales of a particular product over the past 12 months.

Period 1 2 3 4 5 6 7 8 9 10 11 12

Sales 105 135 120 105 90 120 145 140 100 80 100 110

a. Construct a time series plot. What type of pattern exists in the data?

b. Use α =0.3 to compute the exponential smoothing forecasts for the time series.

c. Use a smoothing constant of α = 0.5 to compute the exponential smoothing forecasts.

d. Does a smoothing constant of 0.3 or 0.5 appear to provide more accurate forecasts based on MSE?

3. The attached gretl file contains data on the monthly interest rate and inflation rate in a country over a 3 year period.

a. Construct a time series plot. Is there a relationship between these two variables?

b. Do the variables need any transformations before we run a regression on them? Explain

c. Write a linear regression model to explain the inflation rate as a function of the interest variables.

d. Estimate your regression equation using gretl.

e. According to economic theory, economic variables take time for take effect. Can you improve your regression model based on this information?

f. What would be the inflation rate in January 2013 if the interest rate was 4.4

**Title:**
Time Analysis

**Length:**
2 pages
(550 Words)

**Style:**
MLA

**Preview**

**Time series Analysis Assignment**

Question1

Data: Week 1 2 3 4 5 6

Value 18 13 16 11 17 14

- Construct the time series plot. And explain type of the pattern.
The time series above does not indicate a certain trend in the value variable. However, the variable value is a time series variable as it changes with time. Time is expressed in term of weeks in the x-axis and value variable is on y-axis. The plot indicates a horizontal pattern which mean is varying along a constant average.

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