TITLE:
Forecasting Economic Time Series in the Presence of Variance Instability and Outliers
AUTHORS:
Alexandros E. Milionis, Nikolaos G. Galanopoulos
KEYWORDS:
Applied Time Series Analysis, Time Series “Linearization”, Time Series Trans-formation, Outliers, Forecasting of Macroeconomic Time Series, Greek Macroeconomic Time Series
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.8,
December
13,
2019
ABSTRACT: This work examines the impact of data transformation
(for variance stabilization) and outlier adjustment (“linearization”) on the
quality of univariate time series forecasts, considering each one separately,
as well as in combination. Twenty of the most important time series of the
Greek economy were used for this purpose. Empirical findings show a significant
improvement in forecasts’ confidence intervals, but no substantial improvement
in point forecasts. Furthermore, the combined transformation-linearization
procedure improves substantially the non-normality problem encountered in many macroeconomic time series.