Restricted forecasts and economic target monitoring: An application to the Spanish Consumer Price Index
he purpose of this paper is efficiently to incorporate into a univariate ARIMA model the information contained in alternative forecasts obtained through an expert opinion, an econometric model, or a set target. This kind of non-sample additional information can be drawn from any set of linear constraints on the future course of the series. The introduction of uncertainty about these constraints is permitted. The problem is solved obtaining the "restricted forecast" by employing the logic of Theil's mixed-estimation technique. Formulas for calculating the variance of the restricted forecasts and some inferential procedures are derived from it. The usefulness of the approach in practical situations of forecasting and planning is illustrated by an example based on CPI target monitoring, a very relevant topic in countries pursuing inflation targets.
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- Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983.
"Forecasting and Conditional Projection Using Realistic Prior Distributions,"
NBER Working Papers
1202, National Bureau of Economic Research, Inc.
- Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis.
- Trabelsi, Abdelwahed & Hillmer, Steven C, 1989. "A Benchmarking Approach to Forecast Combination," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(3), pages 353-362, July.
- Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
- Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
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