Univariate Time Series Modelling

Data in economics are frequently collected in form of time series. A time series is a set of observations ordered in time and dependent of each other. We may find time series data in a wide variety of fields: macroeconomics, finance, demographics, etc. The intrinsic nature of a time series is that its observations are ordered in time and the modelling strategies of time series must take into account this property. This does not occur with cross-section data where the sequence of data points does not matter. Due to this order in time, it is likely that the value of a variable y at moment t reflects the past history of the series, that is, the observations of a time series are likely to be correlated. Since the observations are measurements of the same variable, it is usually said that y is correlated with itself, that is, it is autocorrelated.