Log versus level in VAR forecasting: 16 Million empirical answers - expect the unexpected
AbstractThe use of log-transformed data has become standard in macroeconomic forecasting with VAR models. However, its appropriateness in the context of out-of-sample forecasts has not yet been exposed to a thorough empirical investigation. With the aim of filling this void, a broad sample of VAR models is employed in a multi-country setup and approximately 16 Mio. pseudo-out-of-sample forecasts are evaluated. The results show that, on average, the knee-jerk transformation of the data is at best harmless.
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Bibliographic InfoPaper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 42.
Date of creation: 2007
Date of revision:
VAR-forecasting; logarithmic transformation;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
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