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The importance of common cyclical features in VAR analysis: a Monte-Carlo study

  • Vahid, Farshid
  • Issler, Joao Victor

Despite the commonly held belief that aggregate data display short-run comovement, there has been little discussion about the econometric consequences of this feature of the data. We use exhaustive Monte-Carlo simulations to investigate the importance of restrictions implied by common-cyclical features for estimates and forecasts based on vector autoregressive models.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 109 (2002)
Issue (Month): 2 (August)
Pages: 341-363

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Handle: RePEc:eee:econom:v:109:y:2002:i:2:p:341-363
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  1. Vahid, F. & Issler, J.V., 2001. "The Importance Of Common Cyclical Features in VAR Analysis: A Monte-Carlo Study," Monash Econometrics and Business Statistics Working Papers 2/01, Monash University, Department of Econometrics and Business Statistics.
  2. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987. "Stochastic Trends and Economic Fluctuations," NBER Working Papers 2229, National Bureau of Economic Research, Inc.
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  8. Robert F. Engle & Sharon Kozicki, 1990. "Testing For Common Features," NBER Technical Working Papers 0091, National Bureau of Economic Research, Inc.
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  11. Gerald A. Carlino & Keith Sill, 2000. "Regional income fluctuations: common trends and common cycles," Working Papers 00-8, Federal Reserve Bank of Philadelphia.
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  14. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
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  16. Jaime Júnior, Pedro & Ferreira, Pedro Cavalcanti, 1998. "Time-series properties and empirical evidence of growth and infraestructure : revised version," Economics Working Papers (Ensaios Economicos da EPGE) 336, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  17. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
  18. Engle, Robert F. & Issler, Joao Victor, 1995. "Estimating common sectoral cycles," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 83-113, February.
  19. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
  20. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
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