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Consider the simple random walk (et is a stationary white noise process) yt = yt−1 +...

Consider the simple random walk (et is a stationary white noise process) yt = yt−1 + et Using back substitution (start with y1 = y0 + e1), rewrite the previous equation so that yt is a function of y0 and of the error term.

Consider the random walk with drift (et is a stationary white noise process) yt = β0 + yt−1 + et Using back substitution (start with y1 = β0 + y0 + e1), rewrite the previous equation so that yt is a function of y0, a time trend and of the error term.

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