Page 297 - DECO504_STATISTICAL_METHODS_IN_ECONOMICS_ENGLISH

Statistical Methods in Economics

Notes 1980-third quarter:
Seasonalized sales estimate = 7.30 × 1.156
= 8.44
On the basis of the above analysis, the sales estimates of the engineering firm for the second and
third quarters of 1980 are Rs. 7.31 lakhs and Rs. 8.44 lakhs, respectively. It should be noted here that
these estimates have been obtained by taking the trend and seasonal variations into account. Further
the cyclical and irregular components have not been taken into account in these estimates.
The procedure described earlier for the cyclical variation will only help us to study the past behaviour
and does not help us in predicting the future behaviour. As stated in the earlier section, the irregular
variations cannot be studied mathematically.

Time series analysis is helpful in studying the present fluctuations in the economic variables
like, national income, cost, prices, production, etc. It enables us to know achievements
and failures regarding a particular variable.

Self-Assessment
1. Fill in the blanks:
(i) A time series consists of data arranged ............ .
(ii) The four components of time series are ............ , ............ , ............ , and ............ .
(iii) The additive model of components is ............ .
(iv) Secular trend is referred for ............ trend.
(v) Forces of rythmic nature cause ............ .
22.4 Summary

• A series of observations recorded over time is known as a time series. The data on the population
of a country over equidistant time points constitute a time series, e.g. the population of India
recorded at the ten-yearly censuses. Some other examples of time series are: annual production
of a crop, say, rice over a number of years, the wholesale price index over a number of months,
the turn-over of a firm over a number of months, the sales of a business establishment over a
number of weeks, the daily maximum temperature of a place over a number of days, and so on.
• The analysis of time series is of interest in several areas, such as economics, commerce, business,
sociology, geography, meteorology, demography, public health, biology, and so on. The
techniques of time series analysis have largely been developed by economists. Empirical
investigations dealing with economic theory are largely dependent on time series analysists.
Social scientists, in general, do not have the privilege of conducting studies through laboratory
experimentation. Studies are to be based on time series data collected over time in such cases.
For example, trade cycles are important to economists and others in business and commerce.
The exact behaviour of the cycles and their causes are of interest to them. Various theories
explaining the phenomena are put forward. Analysis of time series provides an important tool
for testing the theories and the explanations. Consumer behaviour is studied mainly with the
help of time series data.
• The second objective of time series analysis is to predict the future behaviour of a particular
variable. Time series can play an important role not in making short range estimates for a year
or two a head but also estimating the probable seasonal variations within a year.
• With the secular trend, the value of the variable tends to increase or decrease over a long period
of time. The steady increase in the cost of living recorded by the consumer price index is an

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