Discussion_2.R

library(fpp2)

## Loading required package: ggplot2

## Registered S3 methods overwritten by 'ggplot2':
##   method         from 
##   [.quosures     rlang
##   c.quosures     rlang
##   print.quosures rlang

## Loading required package: forecast

## Registered S3 method overwritten by 'xts':
##   method     from
##   as.zoo.xts zoo

## Registered S3 method overwritten by 'quantmod':
##   method            from
##   as.zoo.data.frame zoo

## Registered S3 methods overwritten by 'forecast':
##   method             from    
##   fitted.fracdiff    fracdiff
##   residuals.fracdiff fracdiff

## Loading required package: fma

## Loading required package: expsmooth

library(readxl)
FEDFUNDS <- read_excel("C:/Users/Joseph/Downloads/FEDFUNDS.xls")
fedFunds.ts <- ts(FEDFUNDS, frequency = 12)

fedFunds.addDecomp <- decompose(fedFunds.ts, type = 'additive')
fedFunds.multDecomp <- decompose(fedFunds.ts, type = 'multiplicative')

add.Dec <- na.omit(fedFunds.addDecomp$random)
mult.Dec <- na.omit(fedFunds.multDecomp$random)

add.Dec.MSE <- sqrt(mean(abs(add.Dec)^2))
print(paste('MSE for Additive:',add.Dec.MSE))

## [1] "MSE for Additive: 28328.5721394527"

mult.Dec.MSE <- sqrt(mean(abs(mult.Dec)^2))
print(paste('MSE for Multiplicative:',mult.Dec.MSE))

## [1] "MSE for Multiplicative: 0.997075380015727"

fedFunds.ts %>% decompose(type = 'multiplicative') %>%
 autoplot() + xlab('year')+
 ggtitle('Classical multiplicative decomposition of Fed Funds')

fedFunds.ts %>% decompose(type = 'additive') %>%
 autoplot() + xlab('year')+
 ggtitle('Classical additive decomposition of Fed Funds')