Last Updated on Monday, 01 March 2010 20:07 Written by Administrator Wednesday, 09 December 2009 02:36
Identification of the problem.
Forecasters must identify what is going to be forecasted, or what is of primary concern. There must be a timeline attached to the forecasting period. This will help the forecasters to determine the methods to be used later.
It is necessary to determine what forecasting has been done in the past using the same variables and how relevant these data are to the problem that is currently under consideration. It must also be determined what economic theory has to say about the variables that might influence the forecast.
This relates to the extent of ease the required data may be collected, hence enabling us to proceed with the forecasts.
Determination of the assumption set.
The forecaster must identify the assumptions that will be made about the data and the process.
After careful examination of the problem, the types of models most appropriate for the problem must be determined.
Preparation of the forecast.
This is the analysis part of the process. After the model to be used is determined, the analysis can begin and the forecast can be prepared.
Once the forecasts have been made, the analyst must determine whether they are reasonable and how they can be compared against the actual behavior of the data.