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Short‐term forecasting of industrial production by means of quick indicators
Author(s) -
Teräsvirta Timo
Publication year - 1984
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.3980030404
Subject(s) - autoregressive integrated moving average , industrial production , term (time) , production (economics) , econometrics , function (biology) , transfer function , computer science , volume (thermodynamics) , principal component analysis , statistics , time series , mathematics , economics , engineering , physics , quantum mechanics , evolutionary biology , biology , keynesian economics , electrical engineering , macroeconomics
Abstract This paper reports results on building transfer function models with linear combinations of quick indicators as inputs for very short‐term prediction of the monthly time series of the volume of industrial production in Finland. The number of input variables in the transfer function models is reduced in two alternative ways: by replacing the original indicators by their two first principal components and by omitting certain indicators. The prediction accuracy of the transfer function models is checked outside the sample and found superior to that of corresponding ARIMA models. Neither of the two ways of reducing the number of input variables leads to consistently more accurate forecasts than the other. It is also found that the prediction accuracy of the transfer function models compares rather favourably with the preliminary values of the volume of industrial production published by the Central Statistical Office during the periods of rapid growth.