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Integration, Kointegration und die Langzeitprognose von Kreditausfallzyklen
[Integration, Cointegration and Long-Horizont Forecasting of Credit-Default-Cycles]

Author

Listed:
  • Wagatha, Matthias

Abstract

Summary: This paper examines the longterm forecast performance of cointegrated systems relative to forecast performance of comparable VAR that fails to recognize that the system is characterized by cointegration. I use Monte Carlo simulation, real data sets, and multi-step-ahead forecasts to study this question. The cointegrated system I examine is composed of six vectors, five macoreconomic variables, and a credit-default-cycle. The forecasts produced by the vector error correction modell associated with this system are compared with those obtained from a corresponding differenced vector autoregression, as well as a vector autoregression based upon the levels of the data. Alternative measures of forecast accuracy (full-system) are discussed. My findings suggest that selective forecast performance improvement may be observed by incorporating knowledge of cointegration rank. Furthermore the results indicate that a cointegration modeling of credit risk should be favored against the prevalent level or differenced estimation.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:8602
    as

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    File URL: https://mpra.ub.uni-muenchen.de/8602/1/MPRA_paper_8602.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Integration; Kointegration; Langzeitprognose; Kreditausfallzyklus; Integration; Cointegration; Forecasting; Credit-default-cycle;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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