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The Relation between Predictability and Complexity: Domestic and Public Consumption in the Romanian Economy

Author

Listed:
  • Scutaru, Cornelia

    () (Romanian Academy, National Institute of Economic Forecasting)

  • Saman, Corina

    () (Romanian Academy, National Institute of Economic Forecasting)

  • Stanica, Cristian

    () (Romanian Academy, National Institute of Economic Forecasting)

Abstract

We continue with the problem of the relation between predictability and complexity in the Romanian economy, analyzing other two components of GDP: domestic consumption and public consumption. The basic idea of this work is that the unpredictability of a system gives a measure of its complexity, so that in order to predict a future state of a complex system one must find the system structure explained by some simpler components that can be predicted. The complexity of the economic system is reflected in the synthetic macroeconomic indicators (GDP and its components). We find the principal components of the macroeconomic variables as a preprocessing step and model them as linear combinations of some simpler non observable predictable variables; we have constructed empirical models for domestic and public consumption; it was shown that these models are sufficiently accurate to predict for two or three periods ahead.

Suggested Citation

  • Scutaru, Cornelia & Saman, Corina & Stanica, Cristian, 2009. "The Relation between Predictability and Complexity: Domestic and Public Consumption in the Romanian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(3), pages 34-46, September.
  • Handle: RePEc:rjr:romjef:v:6:y:2009:i:3:p:34-46
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    Citations

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    Cited by:

    1. Constantin Anghelache & Madalina Gabriela Anghel & Marius Popovici, 2015. "Multiple Regressions Used in Analysis of Private Consumption and Public Final Consumption Evolution," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5(4), pages 69-73, October.
    2. Scutaru, Cornelia, 2011. "Possible Evolutions of Investment Rate – Error Correction Models Scenarios," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 141-162, December.
    3. Scutaru, Cornelia & Fomin, Petre & Stanica, Cristian, 2010. "Prospects for the Evolution of the Economic Sectors’ Behavior," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(5), pages 120-142.

    More about this item

    Keywords

    complexity; predictability; consumption; complexity pursuit; time series forecasting;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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