Forecasting with a parsimonious subset VAR model

Title
Forecasting with a parsimonious subset VAR model
Author(s)
정종철이현철[이현철]
Issue Date
201411
Publisher
ELSEVIER SCIENCE SA
Citation
ECONOMICS LETTERS, v.125, no.2, pp.167 - 170
Abstract
This paper suggests using a unit t-value criterion in imposing restrictions on lags to formulate a subset vector autoregressive (VAR) model for the purpose of point forecasts. Among any other alternative models nested to the initial VAR model, this less restrictive modeling strategy produces the smallest log determinant of the residual covariance matrix adjusted by degrees of freedom. Each equation of the finally derived subset VAR model has a maximized (R) over bar (2) adjusted by degrees of freedom in samples and consequently a minimized 1-step-ahead prediction error in out-of-samples. The applicability of this modeling strategy is excised to the case of a bivariate VAR model for output growth and inflation. (C) 2014 Elsevier B.V. All rights reserved.
URI
http://hdl.handle.net/YU.REPOSITORY/30465http://dx.doi.org/10.1016/j.econlet.2014.08.027
ISSN
0165-1765
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기초교육대학 > 교양학부 > Articles
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