Applied Econometrics

Box-Jenkins methodology
● Recall: purpose of ARIMA models – univariate
decomposition of time series, goal: extract all
statistically significant components
● Box-Jenkins methodology:
● Identification: stationarity and order of
integration, identify p and q.
● Estimation: use software package and do not
care about the details (usually non-linear least
squares or maximum likelihood method).
● Model Validation: ACF and PACF insignificant,
minimized information criteria.