I have two time series, of different length. A time series is GDP growth.
The gdp growth is the series I need, and it is also the longer series, but it has two gaps in two periods one after the other. The aggregate economic indicator is shorter, but it covers the period where I find the two gaps, and for the period in which both data are available, they are strictly correlated (r=0.94).
How could I fill these two gaps?
One possibility would be to use the autoregressive forecast. AR(1) describes quite well the series R²=0.91, and no significant autocorrelation in the residuals. But I do not think it is the optimal solution, because:
- I have two gaps, the second gap will be filled with the two step ahead forecast, which is less precise,
- I have data AFTER the point, and neglecting part of the information does not seem to be the best solution,
- I have also some external information (the correlated series), which I could also exploit.
Which method would be the most appropriate?
Thanks for the tips!