How can I forecast one time-series using another time-series as a proxy? Is Granger causality a good method to use in this case ? What other methods can be used for this task?
if it is found that one series say x granger causes say y series, then this x can be used to forecast the y series, ceteris paribus. nevertheless, economic theory is important as for as interpretations are concerned
Yes, It is.
Granger's causality test determine whether one time series is useful in forecasting another.
If i understand your question correctly, in addion to the above replies I would consider information at this link: https://www.bing.com/search?FORM=U528DF&PC=U528&q=errors+in+variables+models
This problem would arise in time series as well, I think. Best, D. Booth
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