Economics 427 - Economic Forecasting

Instructor: Peter Fuleky
Office: 508 Saunders Hall
Hours: anytime by appointment

Email: fuleky at

Class Info:
Semester: Fall 2016
Class Location: SAUND 541
Class Time: TR 3:00-4:15
Final Exam: Thursday 2:15-4:15
Prerequisites: ECON 321 or BUS 310 or NREM 310 or (MATH 251A and NREM 203) or (MATH 371 and MATH 373) or (MATH 471 and MATH 472)


Student Learning Outcomes:
To be familiar with time series econometric methods for forecasting in business and economics, and to understand the statistical basis for these approaches. Topics include statistical methods for modeling and forecasting trend, seasonal and cyclical components of economic time series, multivariate regression models, forecast evaluation, and forecasting in the presence of unit roots. To be able to apply time series econometric forecasting methods to practical forecasting settings. To be able to use standard econometric modeling software for forecasting. To be able to work in a forecasting team to successfully complete a model-driven forecasting project.

Required Reading:
Rob Hyndman and George Athanasopoulos: Forecasting: Principles and Practice (
Nate Silver: The Signal and the Noise.
Charles Wheelan: Naked Statistics.

You are responsible for all assigned textbook readings, assigned supplementary readings, and the content of my lectures.


  1. Using R. (Rmd source)
  2. Getting started. (Rmd source)
  3. The forecaster's toolbox. (Rmd source)
  4. Judgemental forecasts. (Rmd source)
  5. Simple regression. (Rmd source)
  6. Multiple regression. (Rmd source)
  7. Time series decomposition. (Rmd source)
  8. Exponential smoothing. (Rmd source)
  9. ARIMA models. (Rmd source)

Additional Books of Interest:
Keith Ord, Robert Fildes (2012): Principles of Business Forecasting, Cengage Learning.
Soren Bisgaard, Murat Kulahci (2011): Time Series Analysis and Forecasting by Example, Wiley.
Gloria Gonzalez-Rivera (2012): Forecasting for Economics and Business, Prentice Hall.
Francis X. Diebold (2006): Elements of Forecasting, South-Western.
Spyros G. Makridakis, Steven C. Wheelwright, Rob J Hyndman (1997): Forecasting: Methods and Applications, Wiley.
Michael K. Evans (2003): Practical Business Forecasting, Blackwell.
Walter Enders (2009): Applied Econometric Times Series, Wiley.
James H. Stock, Mark W. Watson (2010): Introduction to Econometrics, Addison-Wesley.
R. Carter Hill, William E. Griffiths, Guay C. Lim (2011): Principles of Econometrics, Wiley.
Here is some old material that I used in the past: Notes 2011-13, Visualizing Multiple Regression.

Course Requirements:
Grades for the course will be based on one midterm exam (20%), one comprehensive final exam (25%), problem sets (15%), a term project (30%), and participation (10%). Participation includes written quizzes, oral recaps of previous class sessions, and contribution to class discussions.

Due dates are firm! Any problem set, project component, or other work submitted after the start of class on the day it is due will be marked down half a grade per day until I have received it.

This term we will be using an online discussion board for out-of-class communication. The system is highly catered to getting you help fast and efficiently from classmates and myself. Rather than emailing questions to the teaching staff, I encourage you to post your questions on the discussion board for all classmates to see.

Find our class page at: TBD

The midterm and final exams must be taken at the scheduled dates and times. Except for medical emergency, I will not schedule makeup exams. Here is some old material that you might find useful: Practice Questions, Practice Midterm 2013, Practice Final 2013.

Problem Sets:
Problem sets will include analytical lecture material and applications of forecasting methods. They will take a substantial amount of time, so plan ahead!

Individual Forecasting Project:
You will work on a forecasting project in which ou will review existing literature on the behavior and determinants of the indicator, perform preliminary statistical assessment, develop a forecasting model, evaluate forecast performance, and write up your results. You will make forecast presentations in addition to the written report. I will provide you with detailed guidelines in a few weeks.

Class Participation:
Active participation helps to deepen understanding of course material. To facilitate this, I organize class in an informal lecture and discussion format, and I expect you to participate. You will be evaluated on your class attendance, your preparation, and your contribution to class discussions. At the beginning of each class there will be a short quiz on the topics covered in the previous class session, and we will discuss one chapter of The Signal and the Noise per week (this will include short presentations by you).

Please be prepared for class. Read handouts and textbook chapters before I lecture on the material. Do not miss class.

Econometric Software:
We will use R, which is open source (free). R is the leading statistical environment for economic research with powerful analytical capabilities. Note, R is not a point-and-click software - it is more like a programming language. For more information on R and forecasting see Rob Hyndman and George Athanasopoulos: Forecasting: Principles and Practice.

Plus-Minus Grading:
I will award plus and minus grades for course work and the overall course grade, according to this plus-minus grade schedule, applied to adjusted (curved) scores.

At my discretion A+
93 and above A
90-92 A-
87-89 B+
83-86 B
80-82 B-
77-79 C+
73-76 C
70-72 C-
67-69 D+
63-66 D
60-62 D-
below 60 F

Academic Integrity:
The University has strict standards on academic honesty and severe penalties for dishonesty. Academic dishonesty includes cheating and plagiarism, and may result in suspension or expulsion from the University.

Two practices that not all students realize may fall into the category of academic dishonesty are: (1) using the same material for more than one course, and (2) turning in work done by several students in a joint project as one student's own work. The rules apply equally to papers for courses taken during the same semester and to courses taken in different semesters.

If a student wishes to use the same material in papers or projects for more than one course, the student must obtain the advance permission of both instructors. Instructors will often give such permission, but if the student neglects to get permission, there may be serious consequences, including failing grades in the courses involved, or even expulsion from the program.

Students with Disabilities:
If you feel you need reasonable accommodations because of the impact of a disability, please (1) contact the KOKUA Program (V/T) at 956-7511 or 956-7612 in room 013 of the QLCSS, and (2) speak with me privately to discuss your specific needs. I will be happy to work with you and the KOKUA Program to meet your access needs related to your documented disability.

Selected Additional Resources on Forecasting:
International Institute of Forecasters, Forecasting Principles web site,

Economagic,, comprehensive online economic data source.

FRED database, St. Louis Federal Reserve Board,

U.S. Bureau of Economic Analysis, Source for U.S. GDP, personal income, balance of payments data, state personal income data.

U.S. Bureau of Labor Statistics, Source for U.S., state and local data on employment, unemployment, consumer prices, and other data.

State of Hawaii Department of Business, Economic Development and Tourism, Primary source for Hawaii data.

University of Hawaii Economic Research Organization, Lots of Hawaii data and links to recent forecast reports.

University of Hawaii Library's Guide to Economics, Lots of useful links.