econometricz wrote:Tom, Thanks for the clarification. That makes things clearer. Could you please tell me how could I use the Forecast option to get such graphs.
You'll really need to look at some of the relevant sections of the User's Guide and Reference Manual and put the pieces together. For the basic task of computing forecasts and graphing these against the actual values (i.e. the original series), it's just a matter of understanding how the FORECAST and GRAPH instructions work. That's all you need to produce the basic results. Start simple, then you can add options to the GRAPH instructions to customize the look of the graphs, and possibly use SPGRAPH instructions to combine multiple graphs on a page. See the details on the HISTORY instruction to determine if you want to also graph results produced by HISTORY.
econometricz wrote: How can I be sure that the forecasted values do not include the shock already?
You may need to read Tom Doan's comment again, as the answer should be pretty clear from what he describes.
To elaborate, say the BSE shock starts at some period T+1. It appears that all they are doing is computing dynamic forecasts starting at period "T" (i.e one period prior to the shock). That is, they are computing forecasts for periods T+1, T+2, etc. based only on what is known through period T. Because the shock was not part of the "known" information as of entry T, the forecasts are effectively a "what if the shock hadn't occurred" prediction. So replicating that approach is simply a matter of computing your dynamic forecasts starting at a period prior to the shock (presumably they are only estimating the model using data prior to that point as well).