Simple Identification and Specification of Cointegrated Varma Models |
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Authors: | Christian Kascha Carsten Trenkler |
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Affiliation: | 1. Department of Statistics and Empirical Economic Research, University of Zurich, Switzerland;2. Department of Economics, University of Mannheim, Germany |
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Abstract: | We bring together some recent advances in the literature on vector autoregressive moving‐average models, creating a simple specification and estimation strategy for the cointegrated case. We show that in this case with fixed initial values there exists a so‐called final moving‐average representation. We prove that the specification strategy is consistent. The performance of the proposed method is investigated via a Monte Carlo study and a forecasting exercise for US interest rates. We find that our method performs well relative to alternative approaches for cointegrated series and methods which do not allow for moving‐average terms. Copyright © 2014 John Wiley & Sons, Ltd. |
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