Forecasting Nonlinear Aggregates and Aggregates with Time-varying Weights
AbstractDespite the fact that many aggregates are nonlinear functions and the aggregation weights of many macroeconomic aggregates are timevarying, much of the literature on forecasting aggregates considers the case of linear aggregates with fixed, time-invariant aggregation weights. In this study a framework for nonlinear contemporaneous aggregation with possibly stochastic or time-varying weights is developed and different predictors for an aggregate are compared theoretically as well as with simulations. Two examples based on European unemployment and inflation series are used to illustrate the virtue of the theoretical setup and the forecasting results.
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Date of creation: 2010
Date of revision:
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Forecasting; stochastic aggregation; autoregression; moving average; vector autoregressive process;
Other versions of this item:
- Helmut Luetkepohl, 2011. "Forecasting Nonlinear Aggregates and Aggregates with Time-varying Weights," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(1), pages 107-133, February.
- Helmut Luetkepohl, 2010. "Forecasting Nonlinear Aggregates and Aggregates with Time-varying Weights," CESifo Working Paper Series 3031, CESifo Group Munich.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-24 (All new papers)
- NEP-CBA-2010-04-24 (Central Banking)
- NEP-ECM-2010-04-24 (Econometrics)
- NEP-ETS-2010-04-24 (Econometric Time Series)
- NEP-FOR-2010-04-24 (Forecasting)
- NEP-ORE-2010-04-24 (Operations Research)
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