AEMBF-P06

AEMBF-P06
(PGP 2006-08 : Term-IV)

APPLICATION OF ECONOMETRIC METHODS IN BUSINESS FORECASTING (A E M B F)
(Faculty: Dr. P. Mishra)

Course Outline

The essential role of econometrics is estimation and testing of economic models. All economic models (whether micro or macro, pertaining to an economy, an industry, a firm or a market) have certain basic features in common.

Ų There is the assumption that the behaviour of economic variables is determined by the joint and simultaneous operation of a number of economic relations.

Ų There is the assumption that the model though admittedly a simplification of the complexities of reality, will capture the crucial feature of the economic sector or system being studied.

Ų There is the hope that from the understanding that the model gives of the system we may predict the "future movements" of the system and possibly control those movements, which may help in the process of decision-making.

One of the major objectives of econometrics is forecasting which means prediction of values of certain variables outside the available sample data. Forecasting is closely related to the process of decision-making and policy evaluation.

Business forecasting situations are often very similar to social behaviour and their forecasting. They require forecasts that can be obtained through the identification and extrapolation of established patterns or existing relationships between measurable variables.

Forecasting of management related variable has always been an integral part of virtually all types of management decision-making. However, as a discipline it has only existed for a few decades only. In the recent years forecasting has become a fully fledged academic exercise and useful in the practical field. Its importance in planning and decision-making has become apparent in such diverse areas as business, government and non-profit institutions.
There are several approaches to forecasting. Some relate to econometric approaches and some don't. In this course, more emphasis will be given to econometric models, problems associated with those and their respective remedies. A brief review of the forecasting methods would form the introductory part of the course.

OBJECTIVE: The specific objectives of this course are as follows:

a) To acquaint the participants with various methods of forecasting.

b) To acquaint the students with some basic econometric models which are used in estimating relationship(s) between different variables in the economy and in forecasting the future values of the variables using the estimated relationship(s).

c) To enable the students to identify/distinguish models which could be used in estimating & forecasting relationship between variable in the area of marketing, finance and other behavioral sciences.

d) To enable the students to use data to estimate the parameters of a model, test the estimated parameters and attempt to judge whether it constitutes a realistic picture of the phenomena under study and whether the model could be used for forecasting.

NOTE:

1. A rigorous explanation, derivation, proof or any other theoretical aspects of the models are beyond the purview of this course. Thus, the course is not a detailed study of the econometric theory as such. However, the students are advised to have a grasp of the applicability of the models and their relative advantages and disadvantages with respect to a particular problem, which is being addressed.

2. Although the course will try to identify various forecasting methods focus will mostly be on econometric methods and several econometric problems associated in single equation models. Both explanatory and extrapolative(time series) forecasting models will be dealt at length.
3. The course outline is tentative.

COURSE CONTENT:

TOPIC	SESSION (including presentation & discussion)
1.Introduction to forecasting methods	1
2.Classification of forecasting methods used in Business Management & Extrapolative Models (Part I). Exercise – I	2
3. Bi-variate models & their applications with special reference to demand forecasting. Exercise – II	4
4. Multivariate models & their applications: Problems encountered in Econometric Models and Remedies (Multicollinearlity, Autocorrelation, Heteroscedasticity & Specification Error) Exercise – III, IV and V	6
5.Structural stability, Dummy Variable Techniques and their Application in Time Series data Exercise VI	3
6. Introduction to Binary Choice Models (Dummy dependent variables)Exercise – VII	2
7.Stationarity in Time series Data & Autoregressive Models for forecasting (Extrapolative Models Part II) Exercise – VIII	2

MODALITIES:

- The course is project oriented. Less time will be used in theoretical explanation in the class. Rather classroom discussion regarding the use and applicability of different forecasting models will be emphasized. Students will be required to acquaint themselves with the theoretical part and try to collect data and fit different forecasting models independently. Relevant literature will, of course, be suggested and hints given by the instructor.

- The students will be divided into groups. Each group will be assigned exercises to apply different models, address econometric problems in the model by using data, which they will collect from published sources.

- The students will try to use different models in forecasting the future values of the variable and test the predictive efficiency of the models.

- The exercise will be presented in the class and discussion will follow in the class itself.

EVALUATION SYSTEM

Assignments & Presentations 8x5	40%
Final Report	20 %
End-Term Test	40%
TOTAL =	100%

REFERENCES

1	Business Forecasting	-	J.E. Hanke
2	Applied Forecasting Methods	-	Nick T. Thomopoulos
3	Forecasting – An Appraisal for Policy Makers & Planners	-	William Ascher
4	Econometric Methods	-	J. Johston
5	Econometric Model Selection – A New Approach Advance Studies in Theoretical & Applied Econometrics	-	A. Aznar Grasa
6	The Methodology of Economic Model Building	-	Lawrence A. Boland
7	Methodology after Samuelson	-	Routledge
8	The Business Forecasting Revolution Nation – Industry – Firm	-	F. Gerand Adams Gerard
9	Econometric Analysis – An Application Approach	-	James L. Doti & Esmael Adibi
10	Introduction to Time Series Modelling and Forecasting in Business & Economics	-	Patricial Gaynor & Rickey C. Kirkpatrick
11	The Econometric Analysis of Time Series	-	A.C. Harvey
12	Economic Forecasting – An Introduction	-	K. Holden, D.A. Peel & J.L. Thompson
13	A course in Macroeconomic Modeling & Forecasting	-	John Whitley (1994)
14	Forecasting Methods for Management	-	Spyros Makridakis Steven C. Wheelwright
15	Econometric Models, Techniques & Applications		Michael Intrilligator Ronald Bodkin & Cheng Hsiao
16	*Basic Econometrics*		D.N.Gujarati

Interview with the students will be correction features for assigning group marks.
BEST OF LUCK!!

Created By: Bijoy Kar on 06/14/2007 at 01:56 PM
Category: PGP-II Doctype: Document

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