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Error-correction versus Differencing in Macroeconomic Forecasting

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Author Info

  • Eitrheim, O.
  • Husebo, T.A.
  • Nymoen, R.

Abstract

Recent 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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File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/1998/Memo-01-1998.pdf
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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 01/1998.

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Length: 26 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:hhs:osloec:1998_001

Contact details of provider:
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
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
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Keywords: FORECASTS ; MACROECONOMICS;

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