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Forecasting macroeconomic variables using a structural state space model

  • de Silva, Ashton

This paper has a twofold purpose; the first is to present a small macroeconomic model in state space form, the second is to demonstrate that it produces accurate forecasts. The first of these objectives is achieved by fitting two forms of a structural state space macroeconomic model to Australian data. Both forms model short and long run relationships. Forecasts from these models are subsequently compared to a structural vector autoregressive specification. This comparison fulfills the second objective demonstrating that the state space formulation produces more accurate forecasts for a selection of macroeconomic variables.

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File URL: http://mpra.ub.uni-muenchen.de/11060/1/MPRA_paper_11060.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11060.

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Date of creation: 01 Sep 2008
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Handle: RePEc:pra:mprapa:11060
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  1. Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 321-42, December.
  2. Leon Berkelmans, 2005. "Credit and Monetary Policy: An Australian SVAR," RBA Research Discussion Papers rdp2005-06, Reserve Bank of Australia.
  3. Nathan S. Balke & Mark E. Wohar, 2001. "Low frequency movements in stock prices: a state space decomposition," Working Papers 0001, Federal Reserve Bank of Dallas.
  4. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
  5. James Morley & Charles Nelson & Eric Zivot, 2002. "Why Are Beveridge-Nelson and Unobserved-Component Decompositions of GDP So Different?," Working Papers UWEC-2002-01, University of Washington, Department of Economics.
  6. James C. Morley & Charles R. Nelson & Eric Zivot, 2003. "Why Are the Beveridge-Nelson and Unobserved-Components Decompositions of GDP So Different?," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 235-243, May.
  7. Hyndman, Rob J. & Koehler, Anne B., 2006. "Another look at measures of forecast accuracy," International Journal of Forecasting, Elsevier, vol. 22(4), pages 679-688.
  8. Renee Fry & James Hocking & Vance L. Martin, 2008. "The Role of Portfolio Shocks in a Structural Vector Autoregressive Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 17-33, 03.
  9. Martin Melecky & Daniel Buncic, 2005. "An Estimated, New Keynesian Policy Model for Australia," Macroeconomics 0511026, EconWPA.
  10. Tommaso Proietti, 2002. "Some Reflections on Trend-Cycle Decompositions with Correlated Components," Econometrics 0209002, EconWPA.
  11. Morley, James C., 2002. "A state-space approach to calculating the Beveridge-Nelson decomposition," Economics Letters, Elsevier, vol. 75(1), pages 123-127, March.
  12. Troy Matheson, 2006. "Assessing the fit of small open economy DSGEs," Reserve Bank of New Zealand Discussion Paper Series DP2006/11, Reserve Bank of New Zealand.
  13. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-47, July-Sept.
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