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Assessing Forecast Performance in a VEC Model: An Empirical Examination

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  • Bragoudakis Zacharias

    (Bank of Greece)

Abstract

This paper is an exercise in applied macroeconomic forecasting. We examine the forecasting power of a vector error-correction model (VECM) that is anchored by a long-run equilibrium relationship between Greek national income and productive public expenditure as suggested by the economic theory. We compare the estimated forecasting values of the endogenous variables to the real-historical values using a stochastic simulation analysis. The simulation results provide new evidence supporting the ability of the model to forecast not only one-period ahead but also many periods into the future. Keywords: Cointegration, Forecasting, Simulation Analysis, Vector error- correction models JEL Classifications: C15, C32, C53, E0, E6 Working Paper Series

Suggested Citation

  • Bragoudakis Zacharias, 2005. "Assessing Forecast Performance in a VEC Model: An Empirical Examination," Econometrics 0502007, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:0502007
    Note: Type of Document - pdf; pages: 15
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    Keywords

    Cointegration; Forecasting; Simulation Analysis; Vector error- correction models;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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