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Long-memory forecasting of US monetary indices Author info | Abstract | Publisher info | Download info | Related research | Statistics Christopher F. Baum (Boston College, Chestnut Hill, Massachusetts, USA)
John Barkoulas (Georgia Southern University, Statesboro, Georgia, USA)
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Several studies have tested for long-range dependence in macroeconomic and financial time series but very few have assessed the usefulness of long-memory models as forecast-generating mechanisms. This study tests for fractional differencing in the US monetary indices (simple sum and divisia) and compares the out-of-sample fractional forecasts to benchmark forecasts. The long-memory parameter is estimated using Robinson's Gaussian semi-parametric and multivariate log-periodogram methods. The evidence amply suggests that the monetary series possess a fractional order between one and two. Fractional out-of-sample forecasts are consistently more accurate (with the exception of the M3 series) than benchmark autoregressive forecasts but the forecasting gains are not generally statistically significant. In terms of forecast encompassing, the fractional model encompasses the autoregressive model for the divisia series but neither model encompasses the other for the simple sum series. Copyright © 2006 John Wiley & Sons, Ltd.
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting .
Volume (Year): 25 (2006)
Issue (Month): 4 ()
Pages: 291-302
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Handle: RePEc:jof:jforec:v:25:y:2006:i:4:p:291-302Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: John Barkoulas & Christopher F. Baum & Mustafa Caglayan, 1998.
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
S. D. Grose & D. S. Poskitt, 2006.
"The Finite-Sample Properties of Autoregressive Approximations of Fractionally-Integrated and Non-Invertible Processes ,"
Monash Econometrics and Business Statistics Working Papers
15/06, Monash University, Department of Econometrics and Business Statistics.
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