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Post by Guest on May 11, 2016 9:21:28 GMT
The tutorial question 3b) asks you to calculate the forecast errors following 3 alternative values of the updating parameter. The answers to the tutorial question gives the evolution of tax rates and then gives the forecast errors. How are these forecast errors calculated, is it using the above equation of adaptive expectations?
Thanks
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gm
New Member
Posts: 19
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Post by gm on May 11, 2016 12:51:31 GMT
The forecast errors are found by subtracting the actual tax rate from the forecasted tax rate for that period.
You can rearrange the adaptive expectations equation to work out these values.
If you input the data into a table with t = 1, 2, 3... and the tax rate, expectations and forecast error then it is much easier to see how this happens.
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Post by Oliver on May 11, 2016 22:47:32 GMT
Thanks for a great answer!
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