VARMA versus VAR for Macroeconomic Forecasting

George Athanasopoulos () and Farshid Vahid ()

No 4/06, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: In this paper, we argue that there is no compelling reason for restricting the class of multivariate models considered for macroeconomic forecasting to VARs given the recent advances in VARMA modelling methodology and improvements in computing power. To support this claim, we use real macroeconomic data and show that VARMA models forecast macroeconomic variables more accurately than VAR models.

Keywords: Forecasting; Identification; Multivariate time series; Scalar components; VARMA models. (search for similar items in EconPapers)
JEL-codes: C32 C51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-for and nep-mac
Date: Written 2006-01
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Related works:
Journal Article: VARMA versus VAR for Macroeconomic Forecasting (2008)
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