A systems approach to recursive economic forecasting and seasonal adjustment

Peter Armitage, Cho Ng and Peter C. Young

No 8, Discussion Paper / Institute for Empirical Macroeconomics from Federal Reserve Bank of Minneapolis

Abstract: The paper discusses a new, fully recursive approach to the adaptive modeling, forecasting and seasonal adjustment of nonstationary economic time-series. The procedure is based around a time variable parameter (TVP) version of the well known component or structural model. It employs a novel method of sequential spectral decomposition (SSD), based on recursive state-space smoothing, to decompose the series into a number of quasi-orthogonal components. This SSD procedure can be considered as a complete approach to the problem of model identification and estimation, or it can be used as a first step in maximum likelihood estimation. Finally, the paper illustrates the overall adaptive approach by considering a practical example of a UK unemployment series which exhibits marked nonstationarity caused by various economic factors.

Keywords: Forecasting; Seasonal variations (Economics); time series analysis (search for similar items in EconPapers)
Date: 1989
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Citations: View citations in EconPapers (5)

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