1 General directions for this Workshop

You will work in RStudio. It is strongly recommended to have the latest version of R and RStudio. Once you are in RStudio, do the following.

Create an R Notebook document (File -> New File -> R Notebook), where you have to write whatever is asked in this workshop. More specifically, you have to:

  • Replicate all the R Code along with its output.

  • You have to do whatever is asked in the workshop. It can be: a) Responses to specific questions and/or do an exercise/challenge.

Any QUESTION or any STEP you need to do will be written in CAPITAL LETTERS. For ANY QUESTION, you have to RESPOND IN CAPITAL LETTERS right after the question.

  • It is STRONGLY RECOMMENDED that you write your OWN NOTES as if this were your personal notebook. Your own workshop/notebook will be very helpful for your further study.

You have to keep saving your .Rmd file, and ONLY SUBMIT the .html version of your .Rmd file. Pay attention in class to know how to generate an html file from your .Rmd.

2 Forecasting the Mexican Economy in the COVID crisis

You have to calibrate an ARIMA/SARIMA model for the IGAE Index, and do a forecast for the next 2 years of the Mexican Economy.

IGAE stands for “Índice General de Actividad Económica”. Since 1993 INEGI calculates this index based on the Mexican general economy and different industry sectors.

2.1 Data download

Go to INEGI and download the IGAE series. Go to the following link:

https://www.inegi.org.mx/temas/igae/#Herramientas

Click in “Bando de Información Económica (BIE)” and then select:

  • Indicador glogal de la actividad económica, base 2013

Expand the option: “Series originales” and, then expand the option “Índice de volumen físico”.

Check-mark the option “Total (Índice base 2013=100)”

Click the button “Consulta”. You will see tabulated data for the IGAE.

Select oldest year (1993 in “Periodo desde”). Finally click the download button and select the Excel format. The file be downloaded to your computer.

Open the Excel file and drop the first columns and last rows so that you only leave the period column and the IGAE Total index. RENAME the first data column as IGAE. Review the Period column, and edit if there are some dates with notes.

Save the Excel file as igae.xls in the same folder of your Workshop 5.

3 Visualize the data

Plot the IGAE index to see how it has grew over time

Generate a column for the simple annual growth of the index month by month and plot it.

What do you observe? Compared to previous crisis in Mexico during 1994-1995 and 2009-2009, how does this crisis look like?

4 Q Challenge - Calibrate an ARIMA-SARIMA model for the IGAE and do a forecast

Your challenge is to design/calibrate an ARIMA/SARIMA model for the IGAE series. You have to follow the calibration method we learned last workshop, and also the Dr. Nau recommendations.

If you come up with more than 1 competing model, select the best with the AIC criteria. You have to DOCUMENT your process while calibrating your model.

You also have to INTERPRET your final model, and finally, you have to do a forecast for the next 4 years. When the Mexican Economy will recover to the highest levels before the crisis?

5 Quiz 5 and W5 submission

Go to Canvas and respond Quiz 5. You will have 3 attempts. Questions in this Quiz are related to concepts of the readings related to this Workshop.

The grade of this Workshop will be the following:

  • Complete (100%): If you submit an ORIGINAL and COMPLETE HTML file with all the activities, with your notes, and with your OWN RESPONSES to questions
  • Incomplete (75%): If you submit an ORIGINAL HTML file with ALL the activities but you did NOT RESPOND to the questions and/or you did not do all activities and respond to some of the questions.
  • Very Incomplete (10%-70%): If you complete from 10% to 75% of the workshop or you completed more but parts of your work is a copy-paste from other workshops.
  • Not submitted (0%)

Remember that you have to submit your .html file through Canvas BEFORE NEXT CLASS.