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Approximate Method of Estimation of Exponential Trend Parameters for Forecasting Process Purposes

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  • Bednarz-Okrzyńska Kamila

    (Ph.D. University of Szczecin Faculty of Management and Economics of Services Department of Quantitative Methods Cukrowa 8, 71-004 Szczecin, Poland)

Abstract

The paper discusses the issue of estimation of exponential trend parameters in terms of its application in the forecast process. Due to the character of a random element, three models were considered: additive, multiplicative, and mixed. For estimating trend parameters, a log transformation method, least squares method, and approximate methods were applied. As a result of computer simulations, high sensitivity of the log transformation method with regard to the assumed random element model was noticed. This method yields the smallest value of ex post error for the multiplicative model but is burdened with a large error for the additive model, where the estimated parameter B takes large values (B > 0.24). In the paper, a new approximate method of estimation of exponential trend parameters is proposed. The method is compared with approximate formulas presented in the paper by Purczyński (2008).

Suggested Citation

  • Bednarz-Okrzyńska Kamila, 2018. "Approximate Method of Estimation of Exponential Trend Parameters for Forecasting Process Purposes," Folia Oeconomica Stetinensia, Sciendo, vol. 18(1), pages 169-181, June.
    • Handle: RePEc:vrs:foeste:v:18:y:2018:i:1:p:169-181:n:13
    DOI: 10.2478/foli-2018-0013
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