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Generalized Forecast Error Variance Decomposition for Linear and Nonlinear Multivariate Models

Markku Lanne and Henri Nyberg

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We propose a new generalized forecast error variance decomposition with the property that the proportions of the impact accounted for by innovations in each variable sum to unity. Our decomposition is based on the well-established concept of the generalized impulse response function. The use of the new decomposition is illustrated with an empirical application to U.S. output growth and interest rate spread data.

Keywords: Forecast error variance decomposition; generalized impulse response function; output growth; term spread (search for similar items in EconPapers)
JEL-codes: C13 C32 C53 (search for similar items in EconPapers)
Pages: 33
Date: 2014-05-19
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for and nep-ore
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Journal Article: Generalized Forecast Error Variance Decomposition for Linear and Nonlinear Multivariate Models (2016) Downloads
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