Question
Consider the following two-variable VAR model with one lag and no intercept: a. Show that the iterated two-period-ahead forecast for Y can be written as
Consider the following two-variable VAR model with one lag and no intercept:
a. Show that the iterated two-period-ahead forecast for Y can be written as Y t/1-2 = ? 1 Y 1-2 + ? 2 X t-2 and derive values for ? 1 and ? 2 in terms of the coefficients in the VAR.
b. In light of your answer to (a), do iterated multiperiod forecasts differ from direct multiperiod forecasts? Explain.
Y=BY-1+YX + X=B21Y-1+Y21-X-1 1111 + 112
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a The vector autoregression VAR model for X and Y is giv...
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Calculus
Authors: Dale Varberg, Edwin J. Purcell, Steven E. Rigdon
9th edition
131429248, 978-0131429246
