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Do we have a trend? Yes, the consumption is growing

c. Testing trend coeficients

2) Measurement and modeling a. Mechanical - moving averages

Moving averages

We have to define the lenght of a moving average. Let's take it as 3. We take first 3 observations and calculate the average. The result is assigned to the time unit which is in the middle. Than we move forward, leave out the lst observation and take into account the fourth one and repeat the procedurę of calculating average and so on (the avg is moving along the time series).

— _ y<-i +yt + ym

^yf    3

How long should our moving average should be?:

- longer moving average gives us better smoothing but we loose morę observations at the beginning and at the end of the time series

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