Prediction of temporally aggregated systems involving both stock and flow variables

Two predictors for a system of temporally aggregated variables are discussed. One predictor is based on the disaggregated variables whereas the other one uses only information contained in the aggregates. In contrast to similar research on the topic it is explicity assumed that the system involves both stock and flow variables. It is shown that some results obtained by treating the two types of variables separately break down if the system contains both. In particular, equality of the two predictors under investigation holds only under extremely restrictive conditions in the latter case. The paper was presented at the European Meeting of the Econometric Society 1988 in Bologna.