Question: how to calculate confidence interval for forecast?
Answer: error = z1- z0 = y1 – e1 – y0 + e0 = e0 – e1. If the errors are assumed to be normal with variance v0 and v1, then the forecast error has variance v0 + v1 (variance is additive), which allows us to determine confidence intervals. So for example a 95% confidence interval would be +/-1.96 times the standard deviation.