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Forecasting in a large macroeconomic system

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  • Harvey Cutler
  • Stephen Davies
  • Martin Schmidt

Abstract

This paper examines the efficiency gains yielded from estimating multiple equation cointegrated systems as compared to their single equation counterparts. In particular, this paper is concerned with the ability of utilizing the cointegrating information to improve forecasting performance. Recently an inability to improve forecasts of real income once money demand error correction terms were introduced has been used to argue that the M2 relationship had broken down during the early 1990s. However, the results suggest that once the underlying responses of variables are more closely investigated, the behaviour of M2 has remained stable.

Suggested Citation

  • Harvey Cutler & Stephen Davies & Martin Schmidt, 2000. "Forecasting in a large macroeconomic system," Applied Economics, Taylor & Francis Journals, vol. 32(13), pages 1711-1718.
  • Handle: RePEc:taf:applec:v:32:y:2000:i:13:p:1711-1718 DOI: 10.1080/000368400421057
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    References listed on IDEAS

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    1. Wodon, Quentin T, 1999. "Between Group Inequality and Targeted Transfers," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 21-39, March.
    2. Yitzhaki, Shlomo & Lerman, Robert I, 1991. "Income Stratification and Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(3), pages 313-329, September.
    3. Ravallion, Martin & Wodon, Quentin, 1997. "Poor areas, or only poor people?," Policy Research Working Paper Series 1798, The World Bank.
    4. Ravallion, Martin & Huppi, Monika, 1991. "Measuring Changes in Poverty: A Methodological Case Study of Indonesia during an Adjustment Period," World Bank Economic Review, World Bank Group, vol. 5(1), pages 57-82, January.
    5. Ravallion, Martin & Sen, Binayak, 1994. "When method matters : toward a resolution of the debate about Bangladesh's poverty measures," Policy Research Working Paper Series 1359, The World Bank.
    6. Lerman, Robert I. & Yitzhaki, Shlomo, 1984. "A note on the calculation and interpretation of the Gini index," Economics Letters, Elsevier, vol. 15(3-4), pages 363-368.
    7. Quentin Wodon, 1997. "Food energy intake and cost of basic needs: Measuring poverty in Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 34(2), pages 66-101.
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    Cited by:

    1. Schmidt, Martin B., 2001. "The long and short of money and prices: a market equilibrium approach," Journal of Economics and Business, Elsevier, vol. 53(6), pages 563-583.
    2. Amir Kia, 2006. "Economic policies and demand for money: evidence from Canada," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1389-1407.
    3. Martin B. Schmidt, 2004. "Exogeneity within the M2 Demand Function: Evidence from a Large Macroeconomic System," Economic Inquiry, Western Economic Association International, vol. 42(4), pages 634-646, October.
    4. Martin Schmidt, 2007. "The long and short of money: short-run dynamics within a structural model," Applied Economics, Taylor & Francis Journals, vol. 40(2), pages 175-192.
    5. Martin Schmidt, 2003. "Money and prices: evidence from the G7 countries," Applied Economics, Taylor & Francis Journals, vol. 35(17), pages 1799-1809.

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