If two consecutive observations are associated with each other is called autocorrelation. PAC investigates autocorrelation as well as shocks in a data but it cannot tell whether the data series has a permanent or a temporary shocks.
If output (PAC) of 1st lag is positive and the 2nd lag is “0” or negative, then this is called cutoff and when cut off is present then this means shocks are there. For example graph A.
If the output (PAC) is like a decreasing lags this is called dice down, then this will also tell that there is shocks present in the data series. For example graph B.
Output other than the above two example will indicate that there is no shocks present in the data series.
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