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Integration, Kointegration und die Langzeitprognose von Kreditausfallzyklen
[Integration, Cointegration and Long-Horizont Forecasting of Credit-Default-Cycles]

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  • Wagatha, Matthias
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    Abstract

    Summary: This paper examines the longterm forecast performance of cointegrated systems relative to forecast performance of comparable VAR that fails to recognize that the system is characterized by cointegration. I use Monte Carlo simulation, real data sets, and multi-step-ahead forecasts to study this question. The cointegrated system I examine is composed of six vectors, five macoreconomic variables, and a credit-default-cycle. The forecasts produced by the vector error correction modell associated with this system are compared with those obtained from a corresponding differenced vector autoregression, as well as a vector autoregression based upon the levels of the data. Alternative measures of forecast accuracy (full-system) are discussed. My findings suggest that selective forecast performance improvement may be observed by incorporating knowledge of cointegration rank. Furthermore the results indicate that a cointegration modeling of credit risk should be favored against the prevalent level or differenced estimation.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8572.

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    Date of creation: 01 Jul 2007
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    Handle: RePEc:pra:mprapa:8572

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    Related research

    Keywords: Integration; Cointegration; Forecasting; Credit-default-cycle; Integration; Kointegration; Langzeitprognose; Kreditausfallzyklus;

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    1. Armstrong, J. Scott & Collopy, Fred, 1992. "Error measures for generalizing about forecasting methods: Empirical comparisons," International Journal of Forecasting, Elsevier, Elsevier, vol. 8(1), pages 69-80, June.
    2. Karim M. Abadir & Kaddour Hadri & Elias Tzavalis, 1999. "The Influence of VAR Dimensions on Estimator Biases," Econometrica, Econometric Society, Econometric Society, vol. 67(1), pages 163-182, January.
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