Combining ARIMA model with regression

Question

I have time series data about sales/day, but I also want to include other data (static/dynamic) to forecast the time series.

Is it possible to combine ARIMA model and regression models to achieve the goal?

Answer 1

Yes. You can either use an ARIMAX model, or a regression with ARIMA errors. Rob Hyndman explains the difference in his blog post "The ARIMAX model muddle". In R, you can use the forecast package to fit regressions with ARIMA errors, or the TSA package to fit an ARIMAX model.