Co-integration and common trends analysis with score-driven models: an application to the federal funds effective rate and US inflation rate

Szabolcs Blazsek and Adrian Licht
Authors registered in the RePEc Author Service: Alvaro Escribano

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Co-integration and common trends are studied for time series variables, by introducing the new t-QVARMA (quasi-vector autoregressive moving average) model. t-QVARMA is an outlier-robust nonlinear score-driven model for the multivariate t-distribution. In t-QVARMA, the I(0) and I(1) components of the variables are separated in a way that is similar to the Granger-representation of VAR models. The relationship between the co-integrated federal funds effective rate and United States (US) inflation rate variables is studied for the period of July 1954 to January 2019. The in-sample statistical and out-of-sample forecasting performances of t-QVARMA are superior to those of the classical Gaussian-VAR model

Keywords: Multivariate; Dynamic; Conditional; Score; (Dcs); Models; Robustness; To; Outliers; Cointegration; Common; Trends; Quasi-Vector; Autoregressive; Moving; Average; (Qvarma); Model (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 (search for similar items in EconPapers)
Date: 2019-05-19
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:28451

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