Assessing Forecast Performance in a VEC Model: An Empirical Examination

Zacharias Bragoudakis
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Zacharias Bragoudakis: Bank of Greece

Econometrics from EconWPA

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 (search for similar items in EconPapers)
JEL-codes: C15 C32 C53 E0 E6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-for and nep-mac
Date: 2005-07-25
Note: Type of Document - doc; pages: 15

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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpem:0507013

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