nep-for New Economics Papers
on Forecasting
Issue of 2005‒08‒20
two papers chosen by
Rob J Hyndman
Monash University

  1. Modelling and Forecasting Seasonality in Indian Macroeconomic Time Series By Pami Dua; Lokendra Kumawat
  2. The Age Profile of Income and the Burden of Unfunded Transfers in Four Countries: Evidence from the Luxembourg Income Study By Gary Burtless

  1. By: Pami Dua (Delhi School of Economics); Lokendra Kumawat (Delhi School of Economics)
    Abstract: This paper models the univariate dynamics of seasonally unadjusted quarterly macroeconomic time series for the Indian economy including industrial production, money supply (broad and narrow measures) and consumer price index. The seasonal integration-cointegration and the periodic models are employed. The `best' model is selected on the basis of a battery of econometric tests including comparison of out-of-sample forecast performance. The results suggest that a periodically integrated process with one unit root best captures the movements in industrial production. The other variables do not exhibit periodically varying dynamics, though narrow money and consumer price index exhibit nonstationary seasonality. For the index of industrial production, the periodic model yields the best out-of-sample forecasts, while for broad money, the model in first differences performs best. On the other hand, for narrow money and the consumer price index, incorporating nonstationary seasonality does not lead to significant gains in forecast accuracy. Finally, we find significant conditional heteroskedasticity in industrial production, with error variance in the first two quarters (highest and lowest economic activity quarters, respectively) almost three times that in the other two quarters.
    Keywords: Seasonality, Integration, Periodic Integration, Forecast Performance
    JEL: C22 C53
    Date: 2005–07
  2. By: Gary Burtless (The Brookings Institution)
    Abstract: This paper uses micro-census income data from the Luxembourg Income Study (LIS) to measure the current and future burden of financing public transfers, especially benefits supporting the aged and near-aged. The analysis distinguishes between income obtained from households' own saving and labor earnings, on the one hand, and the part financed with unfunded transfers, on the other. The burden of unfunded transfers is defined as the tax on factor income that is needed to pay for such transfers under a balanced budget rule. The paper develops a framework for estimating and forecasting this burden using micro-census reports on the current age distribution of factor incomes, the age distribution of transfer incomes, and U.S. Census Bureau projections of the future age structure of the population. Because survey data are inaccurate and incomplete, the micro-census income reports are adjusted to reflect under-reporting based on estimates of aggregate income from the national income and product accounts. Empirical estimates of current and future tax burdens are derived for four OECD countries. These show that the burden of German and U.S. transfers is unusually sensitive to the effects of an aging population. In contrast, the burden of public transfers in Finland and Britain is less sensitive to the effects of an older population because transfers in those countries are less heavily tilted toward aged beneficiaries. Factor incomes received by aged Americans are high by international standards, providing a partial offset to the sharp tilt of U.S. transfers in favor of the elderly. As the U.S. population grows older, factor incomes will decline more gradually than is the case in other rich countries, helping to maintain the size of its tax base.
    Keywords: transfers, micro-census
    Date: 2005–01

This nep-for issue is ©2005 by Rob J Hyndman. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.