Multivariate time series
Henrik Madsen · 2007
In Chapter 8 we introduced the transfer function model which describes the variation of the output time series {Yt} as a function of the input time series {Xt}. The formulation in Chapter 8 was based on the important assumption that {Xt} does not depend on {Yt}. In technical terms this implies that previously we did not allow for a feedback from {Yt} to {Xt}. In other words we assumed an open-loop system. For physical systems we say that there is a causal relationship between the input and the output.