Long-Memory Forecasting of U.S. Monetary Indices
Several studies have tested for long-range dependence in macroeconomic and financial time series but very few have assessed the usefulness of long-memory models as forecast generating mechanisms. This study tests for fractional differencing in the U.S. monetary indices (simple sum and divisia) and compares the out-of-sample fractional forecasts to benchmark forecasts. The long-memory parameter is estimated using RobinsonÃ•s Gaussian semiparametric and multivariate log-periodogram methods. The evidence amply suggests that the monetary series possess a fractional order between one and two. Fractional out-of-sample forecasts are consistently more accurate (with the exception of the M3 series) than benchmark autoregressive forecasts but the forecasting gains are not generally statistically significant. In terms of forecast encompassing, the fractional model encompasses the autoregressive model for the divisia series but neither model encompasses the other for the simple sum series.
|Date of creation:||01 May 2003|
|Date of revision:|
|Publication status:||published, Journal of Forecasting, 2006, 25, 291-302|
|Contact details of provider:|| Postal: |
Web page: http://fmwww.bc.edu/EC/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diebold, Francis X & Mariano, Roberto S, 2002.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(1), pages 134-44, January.
- John Barkoulas & Christopher F. Baum & Mustafa Caglayan, 1998.
"Fractional Monetary Dynamics,"
Boston College Working Papers in Economics
321., Boston College Department of Economics.
- John T. Barkoulas & Christopher F. Baum, 1997.
"Fractional Differencing Modeling And Forecasting Of Eurocurrency Deposit Rates,"
Journal of Financial Research,
Southern Finance Association;Southwestern Finance Association, vol. 20(3), pages 355-372, 09.
- Barkoulas, John T & Baum, Christopher F, 1997. "Fractional Differencing Modeling and Forecasting of Eurocurrency Deposit Rates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(3), pages 355-72, Fall.
- John Barkoulas & Christopher F. Baum, 1996. "Fractional Differencing Modeling and Forecasting of Eurocurrency Deposit Rates," Boston College Working Papers in Economics 317., Boston College Department of Economics.
- Christopher F. Baum & John Barkoulas & Mustafa Caglayan, 1996.
"Persistence in International Inflation Rates,"
Boston College Working Papers in Economics
333., Boston College Department of Economics.
- Diebold, Francis X & Rudebusch, Glenn D, 1991.
"Is Consumption Too Smooth? Long Memory and the Deaton Paradox,"
The Review of Economics and Statistics,
MIT Press, vol. 73(1), pages 1-9, February.
- Francis X. Diebold & Glenn D. Rudebusch, 1989. "Is consumption too smooth? Long memory and the Deaton paradox," Finance and Economics Discussion Series 57, Board of Governors of the Federal Reserve System (U.S.).
- Hassler, Uwe & Wolters, Jurgen, 1995. "Long Memory in Inflation Rates: International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 37-45, January.
- Diebold, Francis X. & Lindner, Peter, 1996. "Fractional integration and interval prediction," Economics Letters, Elsevier, vol. 50(3), pages 305-313, March.
- Sowell, Fallaw, 1992. "Modeling long-run behavior with the fractional ARIMA model," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 277-302, April.
- Diebold, Francis X. & Rudebusch, Glenn D., 1989.
"Long memory and persistence in aggregate output,"
Journal of Monetary Economics,
Elsevier, vol. 24(2), pages 189-209, September.
- Baillie, Richard T & Chung, Ching-Fan & Tieslau, Margie A, 1996. "Analysing Inflation by the Fractionally Integrated ARFIMA-GARCH Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(1), pages 23-40, Jan.-Feb..
- Ray, Bonnie K., 1993. "Long-range forecasting of IBM product revenues using a seasonal fractionally differenced ARMA model," International Journal of Forecasting, Elsevier, vol. 9(2), pages 255-269, August.
- repec:cup:cbooks:9780521634809 is not listed on IDEAS
- Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
- Franses, Philip Hans & Ooms, Marius, 1997. "A periodic long-memory model for quarterly UK inflation," International Journal of Forecasting, Elsevier, vol. 13(1), pages 117-126, March.
- Cheung, Yin-Wong, 1993. "Long Memory in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 93-101, January.
When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:558. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum)
If references are entirely missing, you can add them using this form.