Hi, I need some help 'forecasting' or extrapolating fields that I need to use to forecast in proc arima. So let's say I want to use unemployment rate and GDP to forecast certain prices. What is the best method to extrapolate the uneployment rate and GDp for the next 12 months so that I can start using them in proc arima? I am reading that the extrapolate option is not too safe and should be used with caution.. thanks
One approach you might want to consider is to split your forecasting task into 2 steps: first model and predict your independent variables (in your case unemployment rate and GDP) using either the ARIMA, UCM or ESM procedures and then use these predictions when modeling your depended variable (in your case price) using the ARIMA or UCM procedure.
Alternatively you might want to simply extrapolate your independent variables (using a random walk approach for example), include them in your modeling formulation and then do what-if scenarios by changing the future values of your dependent variables and rerun the forecasting model you have come up with.
As a side note: SAS Forecast Server provides these features out-of-the-box.