Estimation and Prediction from Aggregate Data when Aggregates are Measured More Accurately than Their Components
THE CLASSIC PAPER by Grunfeld and Griliches [3] contains many instructive insights into question of circumstances under which an aggregate dependent variable may be forecasted more precisely with a model based on aggregate variables as opposed to an aggregate of forecasts from individual equations. The statistical model they employ is standard regression framework, a single at macro level and a set of seemingly unrelated regressions (to use Zellner's term) at level. Under…