O'Reilly logo

Economic and Business Forecasting: Analyzing and Interpreting Econometric Results by Sam Bullard, Sarah Watt, Kaylyn Swankoski, Azhar Iqbal, John Silvia

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

CHAPTER 10

A Single-Equation Approach to Model-Based Forecasting

Model-based forecasting approaches are essential elements in the process of effective decision making. One major benefit of using these forecasting approaches is that the model can serve as a baseline for adjusting economic guidance for risk assessment, and a model's forecasting performance can be monitored over time to compare expected versus actual outcomes. In addition, a model that is not performing as expected can be revised and rebuilt to improve guidance to decision makers. Decision makers utilize models to generate both long-term and short-term forecasts. The focus of this chapter, however, is on short-term forecasting.1 We discuss different methods to build forecasting models and describe which method may be appropriate for a forecaster depending on the forecasting objective and on the available data set.

This chapter focuses on single-equation, univariate, forecasting. A univariate model contains one dependent variable and one or more predictors (independent variables). Within a univariate forecasting framework, we discuss two approaches: unconditional and conditional forecasting. With the unconditional forecasting model, we do not need out-of-sample values of predictors to generate an out-of-sample forecast. Conditional forecasting, in contrast, implies that the forecasted values of the dependent variable are conditioned on the predictors' values. Another major difference between unconditional and conditional ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required