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Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

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  • Athanasopoulos, George
  • Guillén, Osmani Teixeira de Carvalho
  • Issler, João Victor
  • Vahid, Farshid

Abstract

We study the joint determination of the lag length, the dimension of the cointegrating space andthe rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using modelselection criteria. We suggest a new two-step model selection procedure which is a hybrid of traditionalcriteria and criteria with data-dependant penalties and we prove its consistency. A MonteCarlo study explores the finite sample performance of this procedure and evaluates the forecastingaccuracy of models selected by this procedure. Two empirical applications confirm the usefulnessof the model selection procedure proposed here for forecasting.

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 713.

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Date of creation: 27 Jan 2011
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Handle: RePEc:fgv:epgewp:713

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Cited by:
  1. Guillén, Osmani Teixeira de Carvalho & Hecq, Alain & Issler, João Victor & Saraiva, Diogo, 2013. "Forecasting multivariate time series under present-value-model short- and long-run co-movement restrictions," Economics Working Papers (Ensaios Economicos da EPGE), FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) 742, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  2. Osmani Teixeira de Carvalho Guillén & Alain Hecq & João Victor Issler & Diogo Saraiva, 2013. "Time Series under Present-Value-Model Short- and Long-run Co-movement Restrictions," Working Papers Series, Central Bank of Brazil, Research Department 330, Central Bank of Brazil, Research Department.
  3. Peter C.B. Phillips & Degui Li & Jiti Gao, 2013. "Estimating Smooth Structural Change in Cointegration Models," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1910, Cowles Foundation for Research in Economics, Yale University.
  4. Alain Hecq & Sébastien Laurent & Franz C. Palm, 2011. "Common Intraday Periodicity," Journal of Financial Econometrics, Society for Financial Econometrics, Society for Financial Econometrics, vol. 10(2), pages 325-353, 2012 20 1.
  5. Hecq Alain & Victor Issler João, 2012. "A Common-Feature Approach for Testing Present-Value Restrictions with Financial Data," Research Memorandum, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) 006, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  6. Heather M Anderson & Farshid Vahid, 2010. "VARs, Cointegration and Common Cycle Restrictions," Monash Econometrics and Business Statistics Working Papers, Monash University, Department of Econometrics and Business Statistics 14/10, Monash University, Department of Econometrics and Business Statistics.
  7. Issler, João Victor & Rodrigues, Claudia & Burjack, Rafael, 2014. "Using common features to understand the behavior of metal-commodity prices and forecast them at different horizons," Journal of International Money and Finance, Elsevier, Elsevier, vol. 42(C), pages 310-335.
  8. Zhipeng Liao & Peter C.B. Phillips, 2012. "Automated Estimation of Vector Error Correction Models," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1873, Cowles Foundation for Research in Economics, Yale University.
  9. Ferreira, Pedro Cavalcanti & Pessôa, Samuel & Santos, Marcelo dos, 2014. "Globalization and the Industrial Revolution," Economics Working Papers (Ensaios Economicos da EPGE), FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) 753, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

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