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Seasonality, Nonstationarity And The Structural Forecasting Of The Index Of Industrial Production, Eugene Kouassi, Walter C. Labys, François B. Aka

Regional Research Institute Working Papers

In this paper we focus on two ‘STS’ models suitable for forecasting the index of industrial production. The first model requires that the index be transformed with a first and seasonal difference filters. The second model considers the index in its second difference filter, while seasonality is modeled with a constant and seasonal dummy variables. Tests designed to discriminate empirically between these two models are also conducted. Our results prefer the performance of the second model, particularly when the conventional ML estimation procedure is replaced by the ALS procedure. This process together with appropriate seasonal adjustment advances the possibility of …