I need some guidance. I need to forecast retail prices in certain geographical areas, so my dependent variable would be the prices itself, the independent variables could be factors such as 1) # of residents, 2) home prices, 3) unemployment rates 4) GDP .. etc. (the actual variables are just used as examples, not real variables)
My question is, if I want to forecast the prices, then MUSt I also forecast the independent variables if I want to use them in the model.. so eg. forecast the unemployment rate also for the next 12 months? and question number 2 is using PROC ARIMA, how can I 1) determine which independent variables make sense to use in the model and 2) how and where in the proc arima statement do I insert these independent variables?
With respect to a forecast model with inputs - unless you have a situation where the inputs lead the dependent (eg. unemployment goes up but prices doesn't change until 6 months later) you will need to forecast inputs as well.