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A vector error-correction forecasting model of the US economy

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  • Anderson, Richard G.
  • Hoffman, Dennis L.
  • Rasche, Robert H.

Abstract

Any research or policy analysis in economics must be consistent with the time-series properties of observed macroeconomic data. Numerous previous studies of such time series reinforce the need to specify correctly a model's multivariate stochastic structure. This paper discusses in detail the speciation of a vector error correction forecasting model that is anchored by long-run equilibrium relationships suggested by economic theory. The model includes six variables - the CPI, the implicit price deflator for GDP, real money balances (MI), the federal funds rate, the yield on long-term (10-year) government bonds, and real GDP - and four cointegrating vectors. Model forecasts during the 1990's are compared to those made by the Federal Reserve and by private forecasters.
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  • Anderson, Richard G. & Hoffman, Dennis L. & Rasche, Robert H., 2002. "A vector error-correction forecasting model of the US economy," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 569-598, December.
    • Handle: RePEc:eee:jmacro:v:24:y:2002:i:4:p:569-598
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    12. José Fernando Escobar R. & Carlos Esteban Posada P., 2004. "Dinero, Precios, Tasa de Interés y Actividad Económica: Un Modelo del Caso Colombiano," Borradores de Economia 303, Banco de la Republica de Colombia.
    13. Haug, Alfred A. & Karagedikli, Ozer & Ranchhod, Satish, 2005. "Monetary policy transmission mechanisms and currency unions: A vector error correction approach to a Trans-Tasman currency union," Journal of Policy Modeling, Elsevier, vol. 27(1), pages 55-74, February.
    14. Wagatha, Matthias, 2007. "Integration, Kointegration und die Langzeitprognose von Kreditausfallzyklen [Integration, Cointegration and Long-Horizont Forecasting of Credit-Default-Cycles]," MPRA Paper 8602, University Library of Munich, Germany.
    15. Guo, Zi-Yi, 2017. "Comparison of Error Correction Models and First-Difference Models in CCAR Deposits Modeling," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 17(4).
    16. Burger, Kees & Smit, Hidde & Vogelvang, Ben, 2002. "Exchange Rates and Natural Rubber Prices, the Effect of the Asian Crisis," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24958, European Association of Agricultural Economists.
    17. Georgios Gatopoulos & Helen Gazopoulou & George A. Zombanakis, 2020. "Assessing the Impact of Domestic Economic Crises on Foreign Travel Data Recording: The Greek Case," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 327-339.
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    19. Jos� Fernando Escobar R. & Carlos Estaban Posada, 2004. "Dinero, Precios, Tasa De Inter�S Y Actividad Econ�Mica: Un Modelo Del Caso Colombiano (1984:I-2003:Iv)," Borradores de Economia 2366, Banco de la Republica.
    20. Ashiya, Masahiro, 2007. "Forecast accuracy of the Japanese government: Its year-ahead GDP forecast is too optimistic," Japan and the World Economy, Elsevier, vol. 19(1), pages 68-85, January.
    21. John Galbraith & Greg Tkacz, 2007. "How Far Can Forecasting Models Forecast? Forecast Content Horizons for Some Important Macroeconomic Variables," Staff Working Papers 07-1, Bank of Canada.
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