Download EViews 4.0 User's Guide

356—Chapter 14. Forecasting from an Equation
able. These forecasts may be interpreted as the forecasts for subsequent periods that would
be computed using information available at the start of the forecast sample.
Dynamic forecasting requires that data for the exogenous variables be available for every
observation in the forecast sample, and that values for any lagged dependent variables be
observed at the start of the forecast sample (in our example, y S − 1 , but more generally,
any lags of y ). If necessary, the forecast sample will be adjusted.
Any missing values for the explanatory variables will generate an NA for that observation
and in all subsequent observations, via the dynamic forecasts of the lagged dependent
variable.
Static Forecasting
Static forecasting performs a series of one-step ahead forecasts of the dependent variable:
• For each observation in the forecast sample, EViews computes
yÖ S + k = cÖ ( 1 ) + cÖ ( 2 )x S + k + cÖ ( 3 )z S + k + cÖ ( 4 )y S + k − 1
(14.8)
always using the actual value of the lagged endogenous variable.
Static forecasting requires that data for both the exogenous and any lagged endogenous
variables be observed for every observation in the forecast sample. As above, EViews will,
if necessary, adjust the forecast sample to account for pre-sample lagged variables. If the
data are not available for any period, the forecasted value for that observation will be an
NA. The presence of a forecasted value of NA does not have any impact on forecasts for
subsequent observations.
A Comparison of Dynamic and Static Forecasting
Both methods will always yield identical results in the first period of a multi-period forecast. Thus, two forecast series, one dynamic and the other static, should be identical for
the first observation in the forecast sample.
The two methods will differ for subsequent periods only if there are lagged dependent variables or ARMA terms.
Forecasting with ARMA Errors
Forecasting from equations with ARMA components involves some additional complexities. When you use the AR or MA specifications, you will need to be aware of how EViews
handles the forecasts of the lagged residuals which are used in forecasting.