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st: RE: PRODUCING A FORECAST WITH TIME-SERIES AND MONTE CARLO TECHNIQUES


From   <Jose.SEISDEDOS@oecd.org>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: PRODUCING A FORECAST WITH TIME-SERIES AND MONTE CARLO TECHNIQUES
Date   Mon, 5 Feb 2007 14:42:08 +0100

Dear all, just to clarify, I am a=only asking about how to "plug" the random
draws coming out of the Monte Carlo simulation back on the estimated
equation, thanks Jose

-----Original Message-----
From: SEISDEDOS Jose, ELS/SPD 
Sent: 05 February 2007 14:34
To: 'statalist@hsphsun2.harvard.edu'
Subject: PRODUCING A FORECAST WITH TIME-SERIES AND MONTE CARLO TECHNIQUES



Hi there,



I would be very grateful indeed for some non-technical guidance on how to
perform a similar forecast on Stata. The paragraphs below, from the BCO 2001
paper "Uncertainty in SS's Lonf term finances", describes accurately what I
mean.
 
Kind regards

Jose


PRODUCING A FORECAST WITH TIME-SERIES AND MONTE CARLO TECHNIQUES 

In the first step, the resulting estimated equation (or set of equations) is
used to generate expected future values simply by solving it forward through
time. 

Given an estimated equation, the second step involves employing computer
simulation 
to generate probability distributions for future outcomes (Monte Carlo
simulation) from the values 
for annual shocks. 

Those annual random draws are plugged into the time-series equation, which
then generates a time path of 
outcomes for the variable in question. By repeating the simulation process
many 
times, analysts can draw inferences about the probability distribution of
future 
outcomes. 

With Monte Carlo and bootstrap simulations, projecting forward is simple once
all of the pieces are in place. Both simulations start with the last actual
value, then draw a random value for the annual shock and add that shock to
the coefficient multiplied by the last actual value. For the
next-second-period, the process is repeated; however, this time the
coefficient is multiplied by the outcome for the first simulation period.
Thus, annual autocorrelations are built into the projection equation."


Jose Seisdedos
Pension Analyst
OECD
DELSA 
Annex Monaco R29

Mail correspondance:
2 Rue André-Pascal
75775 Paris Cedex 16
FRANCE


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