Nonseasonal Differencing

This example shows how to take a nonseasonal difference of a time series. The time series is quarterly U.S. GDP measured from 1947 to 2005.

Load the GDP data set included with the toolbox.

load Data_GDP
Y = Data;
N = length(Y);

figure
plot(Y)
xlim([0,N])
title('U.S. GDP')

The time series has a clear upward trend.

Take a first difference of the series to remove the trend,

$$\Delta y_t=(1-L)y_t=y_t-y_{t-1}.$$

First create a differencing lag operator polynomial object, and then use it to filter the observed series.

D1 = LagOp({1,-1},'Lags',[0,1]);
dY = filter(D1,Y);

figure
plot(2:N,dY)
xlim([0,N])
title('First Differenced GDP Series')

The series still has some remaining upward trend after taking first differences.

Take a second difference of the series,

$${\Delta }^2{y}_t=(1-L{)}^2{y}_t=y_t-2y_{t-1}+y_{t-2}.$$

D2 = D1*D1;
ddY = filter(D2,Y);
  
figure
plot(3:N,ddY)
xlim([0,N])
title('Second Differenced GDP Series')

The second-differenced series appears more stationary.