Forecasting Levels of log Variables in Vector Autoregressions

Gunnar Bårdsen and Helmut Lütkepohl

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: Sometimes forecasts of the original variable are of interest al- though a variable appears in logarithms (logs) in a system of time series. In that case converting the forecast for the log of the variable to a naive forecast of the original variable by simply applying the exponential transformation is not optimal theoretically. A simple expression for the optimal forecast un- der normality assumptions is derived. Despite its theoretical advantages the optimal forecast is shown to be inferior to the naive forecast if speci¯cation and estimation uncertainty are taken into account. Hence, in practice using the exponential of the log forecast is preferable to using the optimal forecast.

Pages: 17 pages
Date: 2009-06-16
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.svt.ntnu.no/iso/WP/2009/7_logVAR1.pdf (application/pdf)

Related works:
Journal Article: Forecasting levels of log variables in vector autoregressions (2011)
Working Paper: Forecasting Levels of log Variables in Vector Autoregressions (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nst:samfok:10409

Access Statistics for this paper

More papers in Working Paper Series from Department of Economics, Norwegian University of Science and Technology Contact information at EDIRC.
Bibliographic data for series maintained by Anne Larsen ().