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The Effect Of Model Selection Uncertainty On The Error Bands For Impulse Response Functions In Vector Error Correction Models
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Book Synopsis The Effect of Model Selection Uncertainty on the Error Bands for Impulse Response Functions in Vector Error Correction Models by : Islam Azzam
Download or read book The Effect of Model Selection Uncertainty on the Error Bands for Impulse Response Functions in Vector Error Correction Models written by Islam Azzam and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional asymptotic and bootstrap methods for finite-order autoregressive models condition on the estimated lag-order of the model, which is later, used to construct the error bands for impulse response functions. Even if the estimated lag order is believed to be correct, this procedure ignores the sampling uncertainty of the lag order. An earlier study by Kilian (1998) introduced an endogenous lag order bootstrap algorithm that reflected the true extent of sampling uncertainty in the regression estimates. Applications of Kilian's method to vector autoregressive (VAR) and vector error correction (VEC) assumed that the true cointegration rank is known. This paper modifies the application of kilian's method on VEC models by endogenizing the cointegration rank besides the lag order. Monte Carlo simulations results from two U.S. economy models show that ignoring cointegration rank uncertainty may seriously undermine the coverage accuracy of bootstrap confidence intervals for VEC impulse response estimates. Endogenizing the cointegration rank choice is shown to improve coverage accuracy at low additional computational cost.
Book Synopsis The Effect of Model-Selection Uncertainty on Error Bands for Estimated Impulse Response Functions in Vector Autoregressive Models by : Islam Azzam
Download or read book The Effect of Model-Selection Uncertainty on Error Bands for Estimated Impulse Response Functions in Vector Autoregressive Models written by Islam Azzam and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Model selection uncertainty adds to the variability in the coefficient estimates when small samples are used because model-selection criteria perform poorly in small samples. Previous literatures account for model-selection uncertainty to improve inference by endogenizing the lag order selection using bootstrap methods. This paper shows that all bootstrap methods fail in cases that are most common in macroeconomic applications. As the maximum eigenvalue of the vector autoregressive model gets closer to one, the bias of the impulse response estimates increases. As a result, the standard bootstrap resampling produces low interval coverage accuracy while bootstrap subsampling produces zero coverage. A proposed solution for this problem is using the first-order bias correction with bootstrap interval for impulse response estimates, which corrects for the first and second order bias of these estimators. This dramatically improves the interval coverage accuracy for impulse response estimates.
Book Synopsis Likelihood-based Inference in Cointegrated Vector Autoregressive Models by : Søren Johansen
Download or read book Likelihood-based Inference in Cointegrated Vector Autoregressive Models written by Søren Johansen and published by Oxford University Press, USA. This book was released on 1995 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: This monograph is concerned with the statistical analysis of multivariate systems of non-stationary time series of type I. It applies the concepts of cointegration and common trends in the framework of the Gaussian vector autoregressive model.
Book Synopsis Impulse Response Analysis with Long Run Restrictions on Error Correction Models by : Kyungho Jang
Download or read book Impulse Response Analysis with Long Run Restrictions on Error Correction Models written by Kyungho Jang and published by . This book was released on 2001 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Structural Vector Autoregressive Analysis by : Lutz Kilian
Download or read book Structural Vector Autoregressive Analysis written by Lutz Kilian and published by Cambridge University Press. This book was released on 2017-11-23 with total page 757 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book discusses the econometric foundations of structural vector autoregressive modeling, as used in empirical macroeconomics, finance, and related fields.
Book Synopsis Determination of Vector Error Correction Models in High Dimensions by : Chong Liang
Download or read book Determination of Vector Error Correction Models in High Dimensions written by Chong Liang and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a shrinkage type methodology which allows for simultaneous model selection and estimation of vector error correction models (VECM) when the dimension is large and can increase with sample size. Model determination is treated as a joint selection problem of cointegrating rank and autoregressive lags under respective practically valid sparsity assumptions. We show consistency of the selection mechanism by the resulting Lasso-VECM estimator under very general assumptions on dimension, rank and error terms. Moreover, with computational complexity of a linear programming problem only, the procedure remains computationally tractable in high dimensions. We demonstrate the effectiveness of the proposed approach by a simulation study and an empirical application to recent CDS data after the financial crisis.
Book Synopsis Three Essays on Structural Vector Error Correction Models with Short-run and Long-run Restrictions by : Kyungho Jang
Download or read book Three Essays on Structural Vector Error Correction Models with Short-run and Long-run Restrictions written by Kyungho Jang and published by . This book was released on 2002 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt: Impulse response analysis requires the imposition of restrictions on the estimated system in order to identify a shock. Short-run restrictions such that monetary policy does not contemporaneously affect real Gross Domestic Production have been often used. Many economic models, however, imply long-run relations among economic variables (or long-run restrictions such that monetary policy does not affect output in the long period) rather than short-run restrictions. Therefore, empirical results based on long-run restrictions may be more consistent with economic theory than those based on short-run restrictions.
Book Synopsis Model Error Concepts & Compensation by : R.E. Skelton
Download or read book Model Error Concepts & Compensation written by R.E. Skelton and published by Elsevier. This book was released on 2014-06-28 with total page 153 pages. Available in PDF, EPUB and Kindle. Book excerpt: Presents a state-of-the-art review of model error concepts, their characterization and compensation in estimation and control problems, with particular emphasis on error propagation, model order selection, performance guarantees, sensitivity and adaptive methods. Main topics covered include linear and nonlinear systems, identification, robotics, computer-aided design, signal processing, computers and communication in control, automation and real time control of processes.
Book Synopsis Three Essays on Long Memory Tests for Persistence in Volatility and Structural Vector Autoregression Modeling of Real Exchange Rates by : Osman Kubilay Gursel
Download or read book Three Essays on Long Memory Tests for Persistence in Volatility and Structural Vector Autoregression Modeling of Real Exchange Rates written by Osman Kubilay Gursel and published by . This book was released on 2002 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter the performance of two of the long memory tests, the Modified Rescaled Range Test and Geweke and Porter-Hudak Test for persistence in small samples is examined using Monte-Carlo methods. Some possible candidates for persistence in volatility are Autoregressive Conditional Heteroskedasticity (ARCH), Markov Regime Switching ARCH, and long memory. The long memory series are simulated through a Semi-Markov process with Pareto waiting times and lognormal realizations. The persistence in volatility arising from transition waiting probabilities for a Markov Regime Switching process, and from the tail index of the waiting time distribution for the Semi-Markov process is established through simulations with different parameter values. There is evidence that persistence in a regime switching process is closely linked to state transition probabilities and waiting times. The second chapter re-examines what structural vector autoregressive modeling of real exchange rates with differenced variables tells us about interesting macroeconomic questions. Using quarterly data from G-7 countries in the post Bretton-Woods period, the evidence suggests that shock identification is not an easy process in a Blanchard and Quah decomposition framework with long run restrictions. Confidence bands do not find significant impulse responses and the signs of the estimated impulse responses are very sensitive to the lag selection criteria adopted. Possible cointegration effects seem to be the main driving force behind the unsatisfactory performance of the structural approach. Chapter three extends the structural vector autoregression model by incorporating cointegration effects. Using the method of Warne (1993), in a simple four-variable vector autoregression (VAR) characterized by cointegration, the response of real exchange rates to various economic shocks are investigated with economically plausible long-run restrictions. The long-run relations and driving stochastic trends of the real exchange rate between United States and other G-7 countries are analyzed in a structural cointegrated framework. Productivity shocks depreciate the real exchange rate and the perverse sign effect of supply shock is corrected for most countries in the sample. More significant impulse responses are observed through confidence intervals. The structural vector error correction decompositions are also found to be not robust to estimating with different lag lengths owing to additional cointegration effects.
Book Synopsis Estimating and Correcting the Effects of Model Selection Uncertainty by : Georges Lucioni Edison Nguefack Tsague
Download or read book Estimating and Correcting the Effects of Model Selection Uncertainty written by Georges Lucioni Edison Nguefack Tsague and published by . This book was released on 2006 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Vector Error Correction Models with Stationary and Nonstationary Variables by : Pu Chen
Download or read book Vector Error Correction Models with Stationary and Nonstationary Variables written by Pu Chen and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Vector error correction models (VECM) have become a standard tool in empirical economics for analysing nonstationary time series data because they combine two key concepts in economics: equilibrium and dynamic adjustment in one single model. The current standard VECM procedure is restricted to time series data with the same degree of integration, i.e. all I(1) variables. Time series data with different degrees of integration, on the other hand, are frequently encountered in empirical studies, necessitating the simultaneous handling of I(1) and I(0) time series. In this paper, the standard VECM is extended to accommodate mixed I(1) and I(0) variables. The mixed VECM conditions are derived, and a test and estimation of the mixed VECM are presented as a result.
Book Synopsis An Impulse-Response Function for a Vector Autoregression with Multivariate-Garch-In-Mean by : John Elder
Download or read book An Impulse-Response Function for a Vector Autoregression with Multivariate-Garch-In-Mean written by John Elder and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives an analytical expression for an impulse-response function for a vector autoregression with multivariate GARCH errors, where the vector of conditional means is a function of the conditional variances. We also provide the appropriate interpretation of an impulse-response function for such models and suggest interesting empirical issues that can be addressed within this framework.
Book Synopsis Dealing with Uncertainties by : Manfred Drosg
Download or read book Dealing with Uncertainties written by Manfred Drosg and published by Springer Science & Business Media. This book was released on 2007-03-06 with total page 193 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dealing with Uncertainties proposes and explains a new approach for the analysis of uncertainties. Firstly, it is shown that uncertainties are the consequence of modern science rather than of measurements. Secondly, it stresses the importance of the deductive approach to uncertainties. This perspective has the potential of dealing with the uncertainty of a single data point and of data of a set having differing weights. Both cases cannot be dealt with the inductive approach, which is usually taken. This innovative monograph also fully covers both uncorrelated and correlated uncertainties. The weakness of using statistical weights in regression analysis is discussed. Abundant examples are given for correlation in and between data sets and for the feedback of uncertainties on experiment design.
Book Synopsis Lag Length Selection for Vector Error Correction Models by : Gary David Sharp
Download or read book Lag Length Selection for Vector Error Correction Models written by Gary David Sharp and published by . This book was released on 2010 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Identification Methods in Vector-Error Correction Models by : Lance A. Fisher
Download or read book Identification Methods in Vector-Error Correction Models written by Lance A. Fisher and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a structural vector-error correction (VEC) model, it is possible to decompose the shocks into those with permanent and transitory effects on the levels of the variables. Pagan and Pesaran derive the restrictions which the permanent-transitory decomposition of the shocks imposes on the structural VEC model. This paper shows that these restrictions are equivalent to a set of restrictions that are applied in the methods of Gonzalo and Ng and King et al. (KPSW). Using this result, it is shown that the Pagan and Pesaran method can be used to recover the structural shocks with permanent effects identically to those from the Gonzalo and Ng and KPSW methods. In the former case, this is illustrated in the context of Lettau and Ludvigson's consumption model and in the latter case in KPSW's six variable model. There are also two other methods for which the Pagan and Pesaran approach can deliver identical permanent shocks which are also discussed.
Book Synopsis Multiple Time Series Models by : Patrick T. Brandt
Download or read book Multiple Time Series Models written by Patrick T. Brandt and published by SAGE. This book was released on 2007 with total page 121 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many analyses of time series data involve multiple, related variables. Modeling Multiple Time Series presents many specification choices and special challenges. This book reviews the main competing approaches to modeling multiple time series: simultaneous equations, ARIMA, error correction models, and vector autoregression. The text focuses on vector autoregression (VAR) models as a generalization of the other approaches mentioned. Specification, estimation, and inference using these models is discussed. The authors also review arguments for and against using multi-equation time series models. Two complete, worked examples show how VAR models can be employed. An appendix discusses software that can be used for multiple time series models and software code for replicating the examples is available. Key Features: * Offers a detailed comparison of different time series methods and approaches. * Includes a self-contained introduction to vector autoregression modeling. * Situates multiple time series modeling as a natural extension of commonly taught statistical models.
Book Synopsis The Vector Error Correction Index Model by : Gianluca Cubadda
Download or read book The Vector Error Correction Index Model written by Gianluca Cubadda and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
