Direct and iterated multistep AR methods for difference stationary processes

Tommaso Proietti

MPRA Paper from University Library of Munich, Germany

Abstract: The paper focuses on the comparison of the direct and iterated AR predictors when Xt is a difference stationary process. In particular, it provides some useful results for comparing the efficiency of the two predictors and for extracting the trend from macroeconomic time series using the two methods. The main results are based on an encompassing representation for the two predictors which enables to derive their properties quite easily under a maintained model. The paper provides an analytic expression for the mean square forecast error of the two predictors and derives useful recursive formulae for computing the direct and iterated coefficients. From the empirical standpoint, we propose estimators of the AR coefficients based on the tapered Yule-Walker estimates; we also provide a test of equal forecast accuracy which is very simple to implement and whose critical values can be obtained with the bootstrap method. Since multistep prediction is tightly bound up with the estimation of the long run component in a time series, we turn to the role of the direct method for trend estimation and derive the corresponding multistep Beveridge-Nelson decomposition.

Keywords: Beveridge-Nelson decomposition; Multistep estimation; Tapered Yule-Walker estimates; Forecast combination (search for similar items in EconPapers)
JEL-codes: C22 C51 C53 E31 E32 (search for similar items in EconPapers)
Date: 2008-10-01
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-for, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/10859/1/MPRA_paper_10859.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/15343/1/MPRA_paper_15343.pdf revised version (application/pdf)

Related works:
Journal Article: Direct and iterated multistep AR methods for difference stationary processes (2011)
Journal Article: Direct and iterated multistep AR methods for difference stationary processes (2011)
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