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A vector autoregressive model of the British Columbia regional economy

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  • Linda Debenedictis

Abstract

We construct a small vector autoregressive (VAR) model to investigate the usefulness of this approach to forecasting the British Columbia (BC) macro economy. The forecasts are compared with univariate ARIMA forecasts. Overall, our results suggest that the accuracy of the VAR matches or exceeds that of the univariate ARIMA. The accuracy of the predictions from our VAR model indicates that VAR as a forecasting tool, is a promising approach for regional forecasting and warrants further investigation. Formal tests for Granger causality are conducted and we find evidence of bi-directional causality between BC employment and prices; and uni-directional causality from BC GDP to both BC employment and Canadian GDP. Our results also suggest uni-directional causality from Canadian GDP to both BC employment and prices; and from prices to GDP within BC.

Suggested Citation

  • Linda Debenedictis, 1997. "A vector autoregressive model of the British Columbia regional economy," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 877-888.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:7:p:877-888
    DOI: 10.1080/000368497326534
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    References listed on IDEAS

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    1. James G. Hoehn, 1984. "A regional economic forecasting procedure applied to Texas," Working Papers (Old Series) 8402, Federal Reserve Bank of Cleveland.
    2. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
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    Cited by:

    1. Todd Potts & David Yerger, 2010. "Variations Across Canadian Regions in the Sensitivity to U.S. Monetary Policy," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(4), pages 443-454, December.
    2. Miquel Clar & Juan-Carlos Duque & Rosina Moreno, 2007. "Forecasting business and consumer surveys indicators-a time-series models competition," Applied Economics, Taylor & Francis Journals, vol. 39(20), pages 2565-2580.
    3. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2007. "A Multivariate Long-Memory Model with Structural Breaks," CESifo Working Paper Series 1950, CESifo.

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