I would need some advice on a multivariate regression problem. I am running regressions with macroeconomic data at first difference and using a AR(1) as regressor to correct autocorrelation (it makes Eviews do iterative regressions). However some models still contain autocorrelation with this method.
I tried to introduce a moving average MA(1) in the model and the regression didn’t show any more autocorrelation. But am I allowed to use a MA(1) as a regressor ? For example can I estimate X = c + a*Y + MA(1) + AR(1) ?
If not, would you have another method to eliminate autocorrelation?
Best Answer
What you are referring to are ARIMA models.They consist of AR, MA and Integrated component(first difference). You can read about them in detail.
You're allowed to use anything as long as you don't use future data in you model.
P.S. If this doesn't answer your question, please guide me about what your query is about.