TIME SERIES DECOMPOSITION

Most economic time series exhibit behaviour that is repeated over time. This allows for these processes to be modelled with the aid of techniques that consider the evolution of the process over a period of time. The application of this methodology would usually refer to the use of techniques that were developed in the time domain and include the general specification of ARIMA and state-space models. Another important phenomena of time series variables is that they may be decomposed into different periodic variations. For example, we may wish to extract the cyclical component of the time series, which may be regarded as the part that exhibits higher periodic variation than the trend.

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