How to forecast with certain conditions

Question

I have a doubt about forecasting analysis.
Let's say I have a "time" variable and a "budget" variable. I would like to build two model:

time series model where I forecast the budget for the next, for example, 6 months;
another time series model where I forecast the next 6 months (same as above) but where I consider a
loss of budget due to another lockdown (due to pandemic) during the months of november and december.

For 1, I would apply a standard forecasting method, but I have a doubt about number 2, what would be the right method and packages to do such thing, if possible?
I would like to do that for a thesis project but I just started to scratch the surface of time series analysis.
Thanks in advance.

Akylas Stratigakos · Answer

I suggest using a categorical variable to model the effect of the lockdown (imposed or not). In order to include this into a standard model, such as linear regression, you need to represent it as a Dummy Variable using 0/1 values. A standard model would would look something like this:
$y=b_0+b_1x+b_2D_{lockdown}$
When lock down is imposed $D_{lockdown}=1$, else $D_{lockdown}=0$. The coefficient $b_2$ will give an estimation of how much the intercept of $y$ changes when lockdown is imposed.

How to forecast with certain conditions

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