What is an example of a case in which you would create an ARIMA model over an ARMA?

Answer 1

The "I" in the ARIMA model refers to the addition of an integrated component to the autoregressive and moving average components of the ARMA model. The integrated component refers to the use of transforming the data by subtracting past values of a variable from current values of a variable in order to make the data stationary.

Thus, the ARIMA model is used over the ARMA model when it is suspected that the data in not stationary.

Many time series are non-stationary and, therefore, suitable for modeling with an ARIMA model. A few examples of things that have been modeled using ARIMA include:

1. Electricity prices
2. Foreign direct investment
3. Inflation
4. Total population