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Identifying the Temporal Dynamics and Macroeconomic Interactions of the US Economy

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Listed:
  • Omar Barroso Khodr
  • Mathias Schneid Tessmann
  • Humberto Nunes Alencar
  • Alex Cerqueira Pinto

Abstract

This paper employs the VAR model to analyze interrelations among key macroeconomic variables, emphasizing unemployment, inflation, and the Fed Funds rate. The model reveals asymmetry in the unemployment-Fed Funds rate relationship, emphasizing the unique influence of unemployment. Lagged values contribute to understanding temporal dependencies, highlighting positive associations between lagged and current inflation. Impulse response analysis and the covariance matrix validate the IS-LM model and Stock and Watson’s (2001) findings. Forecasts anticipate increased unemployment and a slight Fed Funds rate decrease, though accuracy tests reveal reliability issues, especially for the Fed Funds rate. ADF tests support stationarity for inflation and unemployment showing a weak indication against the unit root hypothesis for the Fed Funds rate. Lastly, SARIMA, ARIMA, and DM tests suggest performance differences, pointing to avenues for future research to enhance precision, address reliability issues, and explore variations between SARIMA and VAR models, potentially in a cross-country comparative context.

Suggested Citation

  • Omar Barroso Khodr & Mathias Schneid Tessmann & Humberto Nunes Alencar & Alex Cerqueira Pinto, 2024. "Identifying the Temporal Dynamics and Macroeconomic Interactions of the US Economy," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(8), pages 1-1, August.
    • Handle: RePEc:ibn:ijefaa:v:16:y:2024:i:8:p:1
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    References listed on IDEAS

    as
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    3. John C. Robertson & Ellis W. Tallman, 1999. "Prior parameter uncertainty: Some implications for forecasting and policy analysis with VAR models," FRB Atlanta Working Paper 99-13, Federal Reserve Bank of Atlanta.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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