6Methodologies of Economic Forecasting
6.1 Introduction
Although good parameter estimates are often viewed as the primary purpose of econometric models, the equally important purpose of econometric models is used for good economic forecasting. Economic forecasting methods can be classified into two very broad categories: (1) causal econometric forecasting models and (2) time series models. For the causal econometric model, once the parameters of a causal econometric model are estimated, the estimated parameters in the model can be used for forecasting the dependent variable if the associated values of the independent variables are given. This forecasting method relies on the causal interpretation of the economic ...
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