Two Main Categories of

Forecasting Models
Single Equation Structural Model
0 Structural Models
 Identify how a particular variable of interest depends on
other economic variables
0 Non-structural Models
 Focus on identifying patterns in the movements of
economic variable over time
Non-structural model best
known methods include
0 Time-series Analysis
 Attempts to describe the pattern explicitly
0 Barometric Analysis
 Seeks to identify leading indicators---economic
variables that signal future economic developments
TIME-SERIES MODELS
-Seek to predict outcomes simply by
extrapolating past behavior into the future

0Four Categories of Time-series

patterns:
Trends
Business Cycles
Seasonal Variations
Random Fluctuations
Trend
0 A steady movement in the economic variable over
time
Business Cycles
0 With periods of growth followed by recession,
followed in turn by expansions – remains an
economic fact of life
Recession- sustained fall in GDP and
employment
Seasonal Variations
0 Shorter demand cycle that depend on the time of year.
It affect tourism, air travel, tax preparation services,
clothing and other products or services.