VAR Forecasting Models of the Australian Economy: A Preliminary Analysis
AbstractVector autoregressions (VARs) have been proposed as good forecasting models of macroeconomic variables. This paper presents three naive VAR models of the Australian economy estimated on quarterly data for fifteen variables to 1985(4). Their performance in “forecasting” the calendar and financial year outcomes for 1986–87 (on an ex-ante basis) is compared with that of three sets of private sector forecasts, the 1986–87 Budget forecasts and the actual outcomes from the same period. In general, the VAR forecasts perform at least as well or better than comparable private sector forecasts. Each VAR model is estimated using a different method for allowing for trends in the data. The detrending procedure is an important determinant of the quality of forecasts, with the best forecasts produced by the two models which employ detrending processes appropriate for data which follow a random walk.
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Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp8802.
Date of creation: Jan 1988
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- Trevor, R G & Thorp, S J, 1988. "VAR Forecasting Models of the Australian Economy: A Preliminary Analysis," Australian Economic Papers, Wiley Blackwell, vol. 27(0), pages 108-20, Supplemen.
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- Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 321-42, December.
- Kim, Jae H., 1999. "Asymptotic and bootstrap prediction regions for vector autoregression," International Journal of Forecasting, Elsevier, vol. 15(4), pages 393-403, October.
- Peter M. Summers, 1999. "Macroeconomic Forecasting at the Melbourne Institute," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 32(2), pages 197-205.
- Meredith Beechey & P�R �Sterholm, 2008. "A Bayesian Vector Autoregressive Model with Informative Steady-state Priors for the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 449-465, December.
- Peter C.B. Phillips, 1995. "Automated Forecasts of Asia-Pacific Economic Activity," Cowles Foundation Discussion Papers 1103, Cowles Foundation for Research in Economics, Yale University.
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