Error-correction versus Differencing in Macroeconomic Forecasting
AbstractRecent work by Clements and Hendry have shown why forecasting systems that are in terms of differences, dVARs, can be more accurate than econometric models that include levels variables, ECMs. For example, dVAR forecasts are insulated from parameter non-constancies in the long run mean of the cointegration relationships. In this paper, the practical relevance of these issues are investigated for RIMINI, the quarterly model of the Central Bank of Norway, which we take as an example of an ECM forecasting model.
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Bibliographic InfoPaper provided by Oslo University, Department of Economics in its series Memorandum with number 01/1998.
Length: 26 pages
Date of creation: 1998
Date of revision:
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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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FORECASTS ; MACROECONOMICS;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
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