Seasonality, Nonstationarity and the Structural Forecasting of the Index of Industrial Production

Eugene Kouassi () and Walter C. Labys ()
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Eugene Kouassi: University of Abidjan - Cocody
Walter C. Labys: West Virginia University

A chapter in New Trends in Macroeconomics, 2005, pp 195-221 from Springer

Abstract: Summary In this paper we focus on two STS models suitable for forecasting the index of industrial production. The first model requires that the index be transformed with a first and seasonal difference filters. The second model considers the index in its second difference filter, while seasonality is modeled with a constant and seasonal dummy variables. Tests designed to discriminate empirically between these two models are also conducted. Our results prefer the performance of the second model, particularly when the conventional ML estimation procedure is replaced by the ALS procedure. This process together with appropriate seasonal adjustment advances the possibility of using the suggested index forecasts to help to predict business cycle turning points.

Keywords: Index of industrial production; Forecasting; Structural time series models (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-28556-4_10

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DOI: 10.1007/3-540-28556-3_10

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