Automatic locally stationary time series forecasting with application to predicting UK gross value added time series

Killick, Rebecca and Knight, Marina I and Nason, Guy P and Nunes, Matthew A and Eckley, Idris A (2024) Automatic locally stationary time series forecasting with application to predicting UK gross value added time series. Journal of the Royal Statistical Society: Series C (Applied Statistics). ISSN 0035-9254

Abstract

Accurate forecasting of the UK gross value added (GVA) is fundamental for measuring the growth of the UK economy. A common nonstationarity in GVA data, such as the ABML series, is its increase in variance over time due to inflation. Transformed or inflation-adjusted series can still be challenging for classical stationarity-assuming forecasters. We adopt a different approach that works directly with the GVA series by advancing recent forecasting methods for locally stationary time series. Our approach results in more accurate and reliable forecasts, and continues to work well even when the ABML series becomes highly variable during the COVID pandemic.