Estimation and forecasting in vector autoregressive moving average models for rich datasets

Fruet Dias, Gustavo and Kapetanios, George (2018) Estimation and forecasting in vector autoregressive moving average models for rich datasets. Journal of Econometrics, 202 (1). pp. 75-91. ISSN 0304-4076

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We address the issue of modelling and forecasting macroeconomic variables using rich datasets by adopting the class of Vector Autoregressive Moving Average (VARMA) models. We overcome the estimation issue that arises with this class of models by implementing an iterative ordinary least squares (IOLS) estimator. We establish the consistency and asymptotic distribution of the estimator for weak and strong VARMA(p,q) models. Monte Carlo results show that IOLS is consistent and feasible for large systems, outperforming the MLE and other linear regression based efficient estimators under alternative scenarios. Our empirical application shows that VARMA models are feasible alternatives when forecasting with many predictors. We show that VARMA models outperform the AR(1), ARMA(1,1), Bayesian VAR, and factor models, considering different model dimensions.

Item Type: Article
Uncontrolled Keywords: varma,weak varma,iterative ordinary least squares (iols) estimator,asymptotic contraction mapping,forecasting,rich and large datasets
Faculty \ School: Faculty of Social Sciences > School of Economics
Depositing User: LivePure Connector
Date Deposited: 30 Sep 2019 09:30
Last Modified: 16 Sep 2021 10:48
DOI: 10.1016/j.jeconom.2017.06.022

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