Let ut be an i.i.d. process with E(ut) = 0 and E(ut) = 1. Let 1 1 Et = 3et-1 + ut, xt = 2xt-1 + St.
(a) Express xt in terms of ut, ut_i, … (10 marks)
(b) Compute the first four multiplier effects of ut on xt. (10 marks)
(c) Compute the total multiplier effect of ut on xt. (10 marks)
(d) Compute the mean and the median lag of the multiplier effects of ut on xt. (10 marks)
