How far can changes in general business activity be forecasted? |
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Authors: | Lars-Erik Öller |
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Affiliation: | Ministry of Finance, SF-00171 Helsinki, Finland |
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Abstract: | An F test [Nelson (1976)] of Parzen's prediction variance horizon [Parzen (1982)] of an ARMA model yields the number of steps ahead that forecasts contain information (short memory). A special 10 year pattern in Finnish GDP is introduced as a ‘seasonal’ in an ARMA-model. Forecasts three years ahead are statistically informative but exploiting the complete 10 year pattern raises doubts both about model memory and model validity. |
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Keywords: | Forecasts of business activity Prediction variance horizon ARMA memory ARRM forecasts |
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