Modelling systems with a mixture of I(d) and I(0) variables using the fractionally co-integrated VAR model

Yao, XZ;Izzeldin, M;Li, ZX

[Yao, Xingzhi] Xian Jiaotong Liverpool Univ, Int Business Sch Suzhou, Suzhou 215123, Peoples R China.
[Li, Zhenxiong] Xian Jiaotong Liverpool Univ, XIPU Inst Think Tank, Suzhou 215123, Peoples R China.
[Izzeldin, Marwan] Univ Lancaster, Dept Econ, Lancaster LA1 4YD, England.

ECONOMICS LETTERS

Volume:181 Pages:160-163

DOI:10.1016/j.econlet.2019.05.031

Publication Year:2019

JCR:Q2

ESI Discipline:ECONOMICS & BUSINESS

Latest Impact Factor:2.097

Document Type:Journal Article

Identifier:http://hdl.handle.net/20.500.12791/000488

Abstract

We propose a filtration technique for making inference in systems with I(0) and I(d) variables using the fractionally co-integrated vector autoregressive (FCVAR) model with long memory in the co-integrating residuals. Superior predictions for the I(0) variable are demonstrated using simulations. (C) 2019 Elsevier B.V. All rights reserved.

Keywords

Long memory Fractional co-integration Model predictability

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