Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

George Athanasopoulos (), Osmani Guillén and João Issler
Authors registered in the RePEc Author Service: Farshid Vahid

No 688, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We consider model selection criteria which have data-dependent penalties for a lack of parsimony, as well as the traditional ones. We suggest a new procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties. In order to compute the fit of each model, we propose an iterative procedure to compute the maximum likelihood estimates of parameters of a VAR model with short-run and long-run restrictions. Our Monte Carlo simulations measure the improvements in forecasting accuracy that can arise from the joint determination of lag-length and rank, relative to the commonly used procedure of selecting the lag-length only and then testing for cointegration.

Date: 2009-02-05
New Economics Papers: this item is included in nep-env and nep-tur
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Related works:
Journal Article: Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions (2011)
Working Paper: Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions (2011)
Working Paper: Model selection, Estimation and Forecasting in VAR Models with Short-run and Long-run Restrictions (2010)
Working Paper: Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions (2010)
Working Paper: Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions (2010)
Working Paper: Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions (2009)
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