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On the problem of forecasting prior to ‘price’ control and decontrol
Author(s) -
Revankar Nagesh S.
Publication year - 1992
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.3980110102
Subject(s) - endogeneity , econometrics , context (archaeology) , economics , variable (mathematics) , control variable , relevance (law) , value (mathematics) , conditional expectation , mathematics , statistics , mathematical analysis , paleontology , political science , law , biology
The paper treats the forecasting problem in the context of a demand or supply equation, when the explanatory variable z 1 = x i′z + e t – the ‘price’ variable – is controlled (exogenous) in the forecast period – Case A; or vice versa – Case B. In either case, at least some parameters need to shift in value from the sample to the forecast period, and the forecasts in general need to use prior information on the forecast period values of such parameters. The paper assumes that shifts occur only π z , V ( e t ), and the reduced‐form parameters involved in the exogeneity restriction. When V ( e t ) is the only parameter to shift, neither case calls for any prior information. In other instances, Case A is less demanding than Case B in terms of prior information needs. Among other things, the paper draws attention to the relevance of the distinction between a conditional forecast and a controlled forecast in Case B.