Author(s)

Alexandros E. Milionis^1,2, Nikolaos G. Galanopoulos²

¹Bank of Greece, Department of Statistics, Athens, Greece.
²Department of Statistics and Actuarial-Financial Mathematics, University of the Aegean, Karlovassi, Greece.

This work examines the impact of data transformation (for variance stabilization) and outlier adjustment (“linearization”) on the quality of univariate time series forecasts, considering each one separately, as well as in combination. Twenty of the most important time series of the Greek economy were used for this purpose. Empirical findings show a significant improvement in forecasts’ confidence intervals, but no substantial improvement in point forecasts. Furthermore, the combined transformation-linearization procedure improves substantially the non-normality problem encountered in many macroeconomic time series.

Applied Time Series Analysis, Time Series “Linearization”, Time Series Trans-formation, Outliers, Forecasting of Macroeconomic Time Series, Greek Macroeconomic Time Series

Milionis, A. and Galanopoulos, N. (2019) Forecasting Economic Time Series in the Presence of Variance Instability and Outliers. Theoretical Economics Letters, 9, 2940-2964. doi: 10.4236/tel.2019.98182.