Could Someone Give Me Guidance on Using Stochastic Modeling for Predictive Analysis of Economic Data?

Hello everyone :innocent: :slightly_smiling_face:

I am now researching the use of stochastic modelling for predictive analysis in economic data and would greatly appreciate some assistance on a few crucial points. I have read some core material and examples; but I would like to further my understanding with input from this community.

My major goal is to create a model that can accurately capture and predict certain economic indicators while accounting for inherent randomness and uncertainty. I am particularly interested in time series analysis and how stochastic processes can be used to make predictions that remain accurate and robust over time.

  • I am familiar with numerous models; including ARIMA; GARCH; & more recently; machine learning based techniques like as recurrent neural networks. I am wondering which would be best given the desired balance of computing efficiency and prediction accuracy. Would a traditional stochastic model still be useful for long term economic forecasting; & should we shift to more hybrid or machine learning-integrated models?
  • Economic data frequently reveals seasonal patterns & trends. I have seen approaches that divide the data into trend; seasonality; and random components before using stochastic modelling. How important is this phase; and are there any best practices for maintaining stochastic integrity after decomposition?
  • This has proven a bit difficult. Are there any recommended practices for tweaking parameters in stochastic modeling frameworks? What are some effective validation strategies for ensuring that the model performs reliably with unseen data, particularly in the face of potential economic shocks or unanticipated trends?
  • While I have referred to Quant Econ courses on time series analysis and stochastic processes; I am looking for any more materials that focus on the intersection of stochastic modelling and economic forecasting.

Also I explored some topics related to this https://discourse.quantecon.org/t/estimating-the-transition-probability-matrix-and-a-new-lecture-on-hidden-markov-modelsalesforceadmin but I did not get the sufficient solution of my query so I would really want to get some help from a more experienced person

Thank you in advance for any suggestions; insights; & examples you may give. :smiling_face_with_three_hearts: :smiling_face_with_three_hearts: :hugs:

I am looking forward to participating in discussions and sharing my results along the process.