VAR Forecasting Models of the Australian Economy: A Preliminary Analysis
AbstractVector autoregressions (VARs) have been proposed as good forecasting models of macroeconomic variables. This paper presents three naive VAR models of the Australian economy estimated on quarterly data for fifteen variables to 1985(4). Their performance in âforecastingâ the calendar and financial year outcomes for 1986â87 (on an ex-ante basis) is compared with that of three sets of private sector forecasts, the 1986â87 Budget forecasts and the actual outcomes from the same period. In general, the VAR forecasts perform at least as well or better than comparable private sector forecasts. Each VAR model is estimated using a different method for allowing for trends in the data. The detrending procedure is an important determinant of the quality of forecasts, with the best forecasts produced by the two models which employ detrending processes appropriate for data which follow a random walk.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Australian Economic Papers.
Volume (Year): 27 (1988)
Issue (Month): 0 (Supplement, June)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X
Other versions of this item:
- Robert G. Trevor & Susan J. Thorp, 1988. "VAR Forecasting Models of the Australian Economy: A Preliminary Analysis," RBA Research Discussion Papers rdp8802, Reserve Bank of Australia.
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