Jumah, Adusei (Department of Economics and Finance, Institute for Advanced Studies, Vienna and Department of Economics, University of Vienna) Kunst, Robert M. (Department of Economics and Finance, Institute for Advanced Studies, Vienna and Department of Economics, University of Vienna)
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Many macroeconometric models depict situations where the shares of the major demand aggregates in output are stable over time. The joint dynamic behavior of the considered demand aggregate and output may thus be approximated by a cointegrated vector autoregression. However, the shares of many demand sub-aggregates in output are rather mobile and changing over time. In order to simultaneously capture the flexibility of the shares of the sub-aggregates and the long-run constancy of the share of the total aggregate, we consider trivariate systems of two macroeconomic sub-aggregates and output with errorcorrection terms that are non-linear functions of the original variables. The merits of the models are evaluated by means of several forecasting experiments.
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Paper provided by Institute for Advanced Studies in its series Economics Series with number
149.
Find related papers by JEL classification: C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation
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