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Determination of long-run and short-run dynamics in EC-VARMA models via canonical correlations

Athanasopoulos, George, Poskitt, Donald S., Vahid, Farshid and Yao, Wenying 2015, Determination of long-run and short-run dynamics in EC-VARMA models via canonical correlations, Journal of applied econometrics, vol. 31, no. 6, pp. 1100-1119, doi: 10.1002/jae.2484.

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Title Determination of long-run and short-run dynamics in EC-VARMA models via canonical correlations
Author(s) Athanasopoulos, George
Poskitt, Donald S.
Vahid, Farshid
Yao, WenyingORCID iD for Yao, Wenying orcid.org/0000-0001-6368-0160
Journal name Journal of applied econometrics
Volume number 31
Issue number 6
Start page 1100
End page 1119
Total pages 20
Publisher John Wiley & Sons
Place of publication Chichester, Eng.
Publication date 2015
ISSN 0883-7252
1099-1255
Summary This article studies a simple, coherent approach for identifying and estimating error-correcting vector autoregressive moving average (EC-VARMA) models. Canonical correlation analysis is implemented for both determining the cointegrating rank, using a strongly consistent method, and identifying the short-run VARMA dynamics, using the scalar component methodology. Finite-sample performance is evaluated via Monte Carlo simulations and the approach is applied to modelling and forecasting US interest rates. The results reveal that EC-VARMA models generate significantly more accurate out-of-sample forecasts than vector error correction models (VECMs), especially for short horizons.
Language eng
DOI 10.1002/jae.2484
Field of Research 140305 Time-Series Analysis
140302 Econometric and Statistical Methods
1402 Applied Economics
1403 Econometrics
Socio Economic Objective 910199 Macroeconomics not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, John Wiley & Sons
Persistent URL http://hdl.handle.net/10536/DRO/DU:30085227

Document type: Journal Article
Collection: Department of Economics
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