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Demand Forecasting in the Infrastructure Sector

(One credit course in term VI) Course Instructors: Prof Sajal Ghosh (9810755841) and Prof. Sunil Ashra (9818678751)
Background :

Infrastructure Services and facilities support day to day economic activity. High transactions costs arising from inadequate and inefficient infrastructure can prevent the economy from realizing its full growth potential. Infrastructure sector includes physical infrastructure, comprising of transportation (rail, road, water and air), energy (electricity, coal, oil and gas) and communication (telecom, internet, satellite TV etc.) through its backward and forward linkages, and social infrastructure including water supply, sanitation, sewage disposal, education and health. Effective infrastructure is crucial to India's productive capacity and growth prospects. It has been observed that city roads are often choked with traffic, power cuts are a fact of life and passengers are routinely suffered as booming air travel tests airport capacity. Shortages in supply or volatility in prices have major economic and social effects - which can be exacerbated by our challenging geography and widely dispersed population. If infrastructure services are to be provided without the disruption, capacity needs to be expanded in line with expected demands. Precise forecasting of demand and prices in infrastructure services should be an integral part of the planning process.. Billions in revenue can be lost if a company forecast too low and its inventory is sold out. Similarly, a company can incur significant losses if forecasts are too high and excess inventory builds up. Thus, a comprehensive knowledge of the forecasting process is extremely important for firms success and industrys sustenance
Objective:

Past few years have witnessed several major advances in business data analysis with software engineering There is an array of empirical methods that are available today for business forecasting. An appropriate method is chosen based on the availability of the data (frequency, cross-section, time series, panel data etc) and the desired nature of the forecasts (long term, medium-term and short-term). The objective of the programme is to learn the art and science of

business forecasting with special emphasis on infrastructure sector using sophisticated econometrics and time series techniques along with the application of econometric software (Eviews). COURSE OUTLINE PART I. THE MULTIPLE LINEAR REGRESSION MODEL The Classical Linear Regression Model (CLRM), Estimation -Ordinary Least Squares (OLS), Goodness-of-Fit, Selected Aspects of Model Specification, Inference -- Interval Estimation and Hypothesis Testing, Business Application of the multiple linear regression model PART II. PROBLEMS IN REGRESSION ANALYSIS Consequences of Multicollinearity, Testing for Multicollinearity and corrections for it. Specification Errors -- The Selection of Regressors Heteroskedasticity Non-constant Error Variances; identification, testing and correction Time series issues and Problem of Autocorrelation and its solution

PART III. FORECASTING USING TIME SERIES MODELS Stationary and non-stationary time series, unit root tests Univariate Time Series Analysis o AR, MA, ARMA, ARIMA & MSARIMA Vector auto-regression (VAR) and cointegration Business applications

PART VI. NEURAL NETWORK AND ITS APPLICATION IN FORECASTING PEDAGOGY Presentations, Case studies, Modeling clinics for short, medium and long term forecasting

Course Format The course is based on two 90-minute lectures per week for three months (about 30 hours) along with modeling clinics Course Work and Evaluation One detailed case assignment will be given during the term to all participants in the course. These will require students to perform forecasting exercises using the econometric software EViews. The final course grade will be based on the following: (i) Assignments; ii) Case Presentation; (iii) Quizzes; & (iv) Final Examination Reading Materials: 1. Hanke, J. E. and Wichern, D. W. (2005). Business Forecasting (8th Edition), Pearson 2. Harris, R. and Sollis, R. (2003). Applied Time Series Modeling and Forecasting, Wiley 3. Pindyck R. S. & Rubinfeld D. L. (1998). Econometric Models and Economic Forecasts. Mc-GRAW-HILL Cases: Based on Indian data and published papers from international journals (Reading materials will be provided in due course of time. Knowledge of basic Statics is essential prerequisite))

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