BUSINESS SURVEY DATA IN FORECASTING THE OUTPUT OF SWEDISH AND FINNISHMETAL AND ENGINEERING INDUSTRIES - A KALMAN FILTER APPROACH

In this paper forecasting the production volume of the Swedish and Fin nish metal and engineering industries one quarter ahead is discussed. A practical way of making use of the predictive information in the ans wers of the quarterly business survey is presented which is based on t he application of the Kalman filter. It is found that the most informa tive questions of the business survey from the point of view of foreca sting are different in the two countries. However, for both Sweden and Finland, the improvement in prediction accuracy after taking account of relevant business survey information is significant when the precis ion of autoprojective forecasts is used as a baseline.