1. United States Imports Michael Williams Kevin Crider Andreas Lindal Jim Huang Juan Shan

2. Agenda Introduction Data Modeling Results Conclusion

3. Introduction Data Modeling Results Conclusion US is ranked as No. 4 globalized county in the world Import is a key index to measure globalization Source: ChristianSarkar.com

4. Introduction Data Modeling Results Conclusion The ratio of US import good/service to GDP is increasing United States is transforming from a closed economy to an open environment

5. IMPORTS Trend Introduction Data Modeling Results Conclusion Billions of Dollars Year Trace shows increasing trend with time

6. IMPORTS Histogram Introduction Data Modeling Results Conclusion

7. IMPORTS Correlogram Introduction Data Modeling Results Conclusion Big spike at lag one on PACF Suspicion of unit root

8. IMPORTS ADF Test Introduction Data Modeling Results Conclusion Time series is not stationary Needs prewhitening before we could apply Box Jenkins modeling

9. Introduction Data Modeling Results Conclusion High Kurtosis discards normality More needs to be done to explain the trend DIMPORTS Histogram

10. Dickey-Fuller Test Introduction Data Modeling Results Conclusion Unit root test confirms stationarity Regression can now be performed

11. DIMPORTS Correlogram Introduction Data Modeling Results Conclusion Spike at lag one and two in PACF Structure indicates a possible AR(2)

12. AR Model Estimation Introduction Data Modeling Results Conclusion Both AR components are significant High F-stat

13. Correlogram of AR Model Introduction Data Modeling Results Conclusion Correlogram looks orthogonal, but Q- stats are significant

14. ARCH Test Results Introduction Data Modeling Results Conclusion ARCH test indicates that ARCH term is needed in the model to account for conditional variance

15. ARCH Model Estimation Introduction Data Modeling Results Conclusion Both ARCH terms and GARCH term turn out significant

16. ARCH Model Correlogram Introduction Data Modeling Results Conclusion Q-statistic stays inside confidence interval Correlogram is orthogonal

17. Introduction Data Modeling Results Conclusion ARCH Residual Histogram

18. Introduction Data Modeling Results Conclusion Actual, Fitted, Residuals Residuals graph indicates heteroskedasticity Likely would be improved with VAR Model

19. Introduction Data Modeling Results Conclusion Forecast gives a good fit compared to the actual data Validating ARCH model

20. Introduction Data Modeling Results Conclusion 2008 Forecast

21. Introduction Data Modeling Results Conclusion Questions? US Imports should continue to grow faster than GDP Perhaps there are other techniques we could use in the future to address the correlation in our residuals