Two canonical VARMA forms: Scalar component models vis-à-vis the Echelon form

George Athanasopoulos (), D.S. Poskitt () and Farshid Vahid ()

No 10/07, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: In this paper we study two methodologies which identify and specify canonical form VARMA models. The two methodologies are: (i) an extension of the scalar component methodology which specifies canonical VARMA models by identifying scalar components through canonical correlations analysis and (ii) the Echelon form methodology which specifies canonical VARMA models through the estimation of Kronecker indices. We compare the actual forms and the methodologies on three levels. Firstly we present a theoretical comparison. Secondly, we present a Monte-Carlo simulation study that compares the performance of the two methodologies in identifying some pre-specified data generating processes. Lastly we compare the out-of-sample forecast performance of the two forms when models are fitted to real macroeconomic data.

Keywords: Echelon form; Identification; Multivariate time series; Scalar component; VARMA model. (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-ets and nep-for
Date: Written 2007-07
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