Discover the secrets to applying simple econometric techniques to improve forecastingEquipping analysts, practitioners, and graduate students with a statistical framework to make effective decisions based on the application of simple economic and statistical methods, Economic and Business Forecasting offers a comprehensive and practical approach to quantifying and accurate forecasting of key variables. Using simple econometric techniques, author John E. Silvia focuses on a select set of major economic and financial variables, revealing how to optimally use statistical software as a template to apply to your own variables of interest.
- Presents the economic and financial variables that offer unique insights into economic performance
- Highlights the econometric techniques that can be used to characterize variables
- Explores the application of SAS software, complete with simple explanations of SAS-code and output
- Identifies key econometric issues with practical solutions to those problems
Presenting the "ten commandments" for economic and business forecasting, this book provides you with a practical forecasting framework you can use for important everyday business applications.
JOHN E. SILVIA is a Managing Director and the Chief Economist for Wells Fargo Securities. In 2010, he was recognized for the Best Inflation Forecast, the Best Overall Forecast, and the Best Personal Consumption Expenditures Forecast by The Federal Reserve Bank of Chicago.
AZHAR IQBAL is an Econometrician and Vice President at Wells Fargo Securities where he provides quantitative analysis to the Economics group as well as modeling and forecasting of macro and financial variables. He has spoken at the American Economic Association, Econometric Society, and other international conferences.
SAM BULLARD is a Managing Director and Senior Economist at Wells Fargo Securities providing analysis and commentary on financial markets and macroeconomic developments.
SARAH WATT is an Economist with Wells Fargo Securities. She covers the U.S. macro economy, including labor market trends. She also works closely with senior members of her team to produce special reports and regional economic commentary on several U.S. states.
KAYLYN SWANKOSKI is an Economic Analyst at Wells Fargo Securities.
Preface
Acknowledgments
Chapter 1: Creating Harmony Out of Noisy Data
Effective Decision Making: Characterize the Data
Chapter 2: First, Understand the Data
Growth: How is the Economy Doing Overall?
Personal Consumption
Gross Private Domestic Investment
Government Purchases
Net Exports of Goods and Services
Real Final Sales and Gross Domestic Purchases
The Labor Market: Always a Core Issue
Establishment Survey
Data Revision: A Special Consideration
The Household Survey
Marrying the Labor Market Indicators Together
Jobless Claims
Inflation
Consumer Price Index: A Society’s Inflation Benchmark
Producer Price Index
Personal Consumption Expenditure Deflator: The Inflation Benchmark for Monetary Policy
Interest Rates: Price of Credit
The Dollar and Exchange Rates: The United States in a Global Economy
Corporate Profits
Summary
Chapter 3: Financial Ratios
Profitability Ratios
Summary
Chapter 4: Characterizing a Time Series
Why Characterize a Time Series?
How to Characterize a Time Series
Application: Judging Economic Volatility
Summary
Chapter 5: Characterizing a Relationship between Time Series
Important Test Statistics in Identifying Statistically Significant Relationships
Simple Econometric Techniques to Determine a Statistical Relationship
Advanced Econometric Techniques to Determine a Statistical Relationship
Summary
Additional Reading
Chapter 6: Characterizing a Time Series Using SAS Software
Tips for SAS Users
The DATA Step
The PROC Step
Summary
Chapter 7: Testing for a Unit Root and Structural Break Using SAS Software
Testing a Unit Root in a Time Series: A Case Study of the U.S. CPI
Identifying a Structural Change in a Time Series
The Application of the H-P Filter
Application: Benchmarking the Housing Bust, Bear Stearns and Lehman Brothers
Summary
Appendix 7A: The State-Space Approach to Testing for a Structural Break
Chapter 8: Characterizing a Relationship Using SAS
Useful Tips for an Applied Time Series Analysis
Converting a Dataset from One Frequency to Another
Application: Did the Great Recession Alter Credit Benchmarks?
Summary
Chapter 9: The Ten Commandments of Applied Time Series Forecasting for Business and Economics
Objective of the Forecast: What Are You Forecasting?
What is the Purpose of Forecasting?
Cost of Forecast Error: The Loss Function
Forecast Horizon: How Far Out to Forecast
The Choice of Variables: Quality vs. Quantity
Forecasting Modeling: How Do You Choose the Forecast Methods?
How Do You Present the Results?
Evaluating the Forecast Results
Recursive Methods: The Controlled-Forecasting Experiment
There is No-Silver Bullet: Forecasting Models Evolve Over Time
Summary
Chapter 10: A Single-Equation Approach to Model-Based Forecasting
The Unconditional (A-Theoretical) Approach
The Conditional (Theoretical) Approach
Recession Forecast Using a Probit Model
Summary
Chapter 11: A Multiple-Equations Approach to Model-Based Forecasting
The Importance of the Real-Time Short-term Forecasting
The Individual Forecast vs. Consensus Forecast: Is There an Advantage?
The Econometrics of Real-Time Short-term Forecasting: The BVAR Approach
Forecasting in Real-Time: Issues Related to the Data and the Model Selection
Case Study: WFC vs. Bloomberg
Summary
Appendix 11A: List of Variables
Chapter 12: A Multiple-Equations Approach to Long-Term Forecasting
The Unconditional Long-term Forecasting: The BVAR Model
The BVAR Model with Housing Starts
The Model without Oil Price Shock
The Model with Oil Price Shock
Summary
Chapter 13: The Risks of Model-Based Forecasting: Modeling, Assessing and Remodeling
Risks to the short-term Forecasting: There is no Magic Bullet
13.2 Risks of Long-term Forecasting: Black Swan vs. a Group of Black Swans
13.3 Model-Based Forecasting and the Great Recession/Financial Crisis: Worst-case Scenario vs. Panic
Summary
Chapter 14: Putting the Analysis to Work in the 21st Century Economy
Benchmarking Economic Growth
Industrial Production: Another Case of Stationary Behavior
Employment: Jobs in the 21st Century
Inflation
Interest Rates
Imbalances Between Bond Yields and Equity Earnings
A Note of Caution on Patterns of Interest Rates
Business Credit: Patterns Reminiscent of Cyclical Recovery
Profits
Financial Market Volatility: Assessing Risk
Dollar
Economic Policy—Impact of Fiscal Policy and the Evolution of the U.S. Economy
The Long-Term Deficit Bias and Its Economic Implications
Summary
Appendix: Useful References for SAS Users
About the Authors
Index
Other versions by this Author
