Clues in the error process. A second round diagnosic procedure for transfer function modelling

Abstract

The crosscorrelations of the residual and the prewhitened input series are used to test for the correct transfer function model specification. An identification diagnostic procedure is developed that will distinguish between spikes in the cross correlations of the residual and the prewhitened input series that arise from inadequacies in the noise model from those that arise due to problems in the specification of the input model. The proposed procedure simplifies the second-round iterations of transfer-function model building.