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1 CHAPTER 10 FORECASTING THE LONG TERM: DETERMINISTIC AND STOCHASTIC TRENDS Figure 10.1 Economic Time Series with Trends González-Rivera: Forecasting for.

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Presentation on theme: "1 CHAPTER 10 FORECASTING THE LONG TERM: DETERMINISTIC AND STOCHASTIC TRENDS Figure 10.1 Economic Time Series with Trends González-Rivera: Forecasting for."— Presentation transcript:

1 1 CHAPTER 10 FORECASTING THE LONG TERM: DETERMINISTIC AND STOCHASTIC TRENDS Figure 10.1 Economic Time Series with Trends González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

2 2 Figure 10.2 Time Series with Linear Deterministic Trend González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc Deterministic Trends

3 3 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. Figure 10.3 Common Deterministic Trends Trend Shapes

4 4 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. Figure 10.4 Growth Rate with Linear and Quadratic Deterministic Trends

5 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 5 Figure 10.5 Home Mortgage Outstanding Debt (Billions of Dollars) Optimal Forecasting

6 6 Table 10.1 Deterministic Trend Specifications González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

7 7 Table 10.2 Least Squares Estimation of a Polynomial Trend

8 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 8 Figure 10.6 Forecast of Outstanding Mortgage Debt Based on Table 10.2

9 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 9 Figure 10.7 Correlograms of the Residuals of the Fourth Polynomial Trend Model

10 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 10 Table 10.3 Least Squares Estimation of Trend and AR Model

11 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 11 Figure 10.8 Random Walk without Drift and with Drift 10.2 Stochastic Trends Trend Shapes

12 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 12 Figure 10.9 Autocorrelograms of Random Walks Stationarity Properties

13 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc Testing for Unit Root Table 10.4 Dickey-Fuller Critical Values for a 5% Critical Region

14 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 14 Table 10.5 Unit Root Testing Procedure

15 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 15 Figure Differences in the Forecasts of Random Walk and Trend-Stationary Processes Optimal Forecast

16 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 16 Figure Index of Total Hours Worked in United States and Spain

17 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 17 Table 10.6 Augmented Dickey-Fuller Unit Root Test on Spain

18 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 18 Figure Correlogram of Residuals

19 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 19 Table 10.7 Augmented Dickey-Fuller Unit Root Test on Spain

20 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 20 Table 10.8 Least Squares Estimation of

21 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 21 Table 10.9 Four-Step-Ahead Forecast of Index of Total Hours Worked in Spain

22 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 22 Figure Forecast of Index Total Hours Worked in Spain with 95% Confidence Bands

23 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 23 Table Augmented Dickey-Fuller Unit Root Test on the United States

24 González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc. 24 Table Least Squares Estimation of Index of Total Hours Worked in the United States


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