Municipal budget forecasting with multivariate ARMA models

In this paper multivariate ARMA models are applied to the problem of forecasting city budget variables. Unlike univariate time‐series methods, multivariate models can use relationships among budget variables as well as relationships with economic and demographic indicators. Although available budget series are shorter than what is usually believed necessary for multivariate ARMA modelling, the forecasts seem to be of higher quality than those from univariate models.