# Forecasting with econometric models

Here’s another interesting example where explanatory and predictive tasks create different models: econometric models. These are essentially regression models of the form: Y(t) = beta0 + beta1 Y(t-1) + beta2 X(t) + beta3 X(t-1) + beta4 Z(t-1) + noise An example would be forecasting Y(t)= consumer spending at time t, where the input variables can be consumer spending in previous time periods and/or other information that is available at time t or earlier. In economics, when Y(t) is the state of the economy at time t, there is a distinction between three types of variables (aka “indicators”): Leading, coincident, and … Continue reading Forecasting with econometric models