Two canonical VARMA forms: Scalar component models vis-à-vis the Echelon form
AbstractIn this paper we study two methodologies which identify and specify canonical form VARMA models. The two methodologies are: (i) an extension of the scalar component methodology which specifies canonical VARMA models by identifying scalar components through canonical correlations analysis and (ii) the Echelon form methodology which specifies canonical VARMA models through the estimation of Kronecker indices. We compare the actual forms and the methodologies on three levels. Firstly we present a theoretical comparison. Secondly, we present a Monte-Carlo simulation study that compares the performance of the two methodologies in identifying some pre-specified data generating processes. Lastly we compare the out-of-sample forecast performance of the two forms when models are fitted to real macroeconomic data.
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Bibliographic InfoPaper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 10/07.
Length: 25 pages
Date of creation: Jul 2007
Date of revision: May 2009
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Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-08 (All new papers)
- NEP-ECM-2007-08-08 (Econometrics)
- NEP-ETS-2007-08-08 (Econometric Time Series)
- NEP-FOR-2007-08-08 (Forecasting)
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