Part 1

• Using the methods and tools covered in this course: develop, evaluate and present a statistical model to forecast either:

• UK CPI Inflation

• Real UK GDP Growth

• This model should produce more accurate forecasts than a simple benchmark model such as:

• Random Walk Models

• AR(1) Models

• Conduct an Out-of-Sample forecasting exercise using the proposed model and the simple benchmark models. Clearly state the whether a rolling or expanding window is used.

• Compute MSFE and MAFE to evaluate the forecast accuracy for each model, and plot the cumulative MSFE and MAFE over the evaluation period.

Part 2