Time series with unit roots are very common in economic and financial models, and unit roots cause problems in assessing the model. Fortunately, a time series with a unit root may be transformed to achieve covariance stationarity using the first-differencing process. Although the explanatory power of the model was high (but note the small sample size), a model using first-differenced data often has less explanatory power. The time trend was not significant, so that was not a possible answer |
