Given that Z_t is a zero-mean white noise process with variance sigma^2, which of the following are I(0) processes?
(A) X_t = X_{t-1} + Z_t
(B) X_t = a*X_{t-1} + Z_t where 0 < a < 1
(C) X_t = 2 + Z_t
(D) X_t = 8 + X_{t-1} + Z_t.
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Binary-choice and time-series models has come up 14 times in 2 exams since 2023.
This question is on Stationarity, unit roots and cointegration, part of Binary-choice and time-series models in Econometrics.
Whether a time series has a stable mean and what goes wrong when it does not.
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Question from the UGC-NET 2023 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.