Non disponibile in italiano
Marco Capasso
- 16 November 2009
- WORKING PAPER SERIES - No. 1115Details
- Abstract
- We propose a new method for multivariate forecasting which combines Dynamic Factor and multivariate GARCH models. The information contained in large datasets is captured by few dynamic common factors, which we assume being conditionally heteroskedastic. After presenting the model, we propose a multi-step estimation technique which combines asymptotic principal components and multivariate GARCH. We also prove consistency of the estimated conditional covariances. We present simulation results in order to assess the finite sample properties of the estimation technique. Finally, we carry out two empirical applications respectively on macroeconomic series, with a particular focus on different measures of inflation, and on financial asset returns. Our model outperforms the benchmarks in fore-casting the inflation level, its conditional variance and the volatility of returns. Moreover, we are able to predict all the conditional covariances among the observable series.
- JEL Code
- C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
- 16 June 2009
- WORKING PAPER SERIES - No. 1061Details
- Abstract
- This paper explores the statistical properties of house-hold consumption-expenditure budget share distributions
- JEL Code
- D3 : Microeconomics→Distribution
D12 : Microeconomics→Household Behavior and Family Economics→Consumer Economics: Empirical Analysis
C12 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Hypothesis Testing: General
- 31 July 2008
- WORKING PAPER SERIES - No. 922Details
- Abstract
- We review, under a historical perspective, the development of the problem of nonfundamentalness of Moving Average (MA) representations of economic models. Nonfundamentalness typically arises when agents’ information space is larger than the econometrician’s one. Therefore it is impossible for the latter to use standard econometric techniques, as Vector AutoRegression (VAR), to estimate economic models. We restate the conditions under which it is possible to invert an MA representation in order to get an ordinary VAR and identify the shocks, which in a VAR are fundamental by construction. By reviewing the work by Lippi and Reichlin [1993] we show that nonfundamental shocks may be very different from fundamental shocks. Therefore, nonfundamental representations should not be ruled out by assumption and indeed methods to detect nonfundamentalness have been recently proposed in the literature. Moreover, Structural VAR (SVAR) can be legitimately used for assessing the validity of Dynamic Stochastic General Equilibrium models only if the representation associated with the economic model is fundamental. Factor models can be an alternative to SVAR for validation purposes as they do not have to deal with the problem of nonfundamentalness.
- JEL Code
- C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C51 : Mathematical and Quantitative Methods→Econometric Modeling→Model Construction and Estimation
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
- 20 May 2008
- WORKING PAPER SERIES - No. 903Details
- Abstract
- We propose a refinement of the criterion by Bai and Ng [2002] for determining the number of static factors in factor models with large datasets. It consists in multi-plying the penalty function by a constant which tunes the penalizing power of the function itself as in the Hallin and Liška [2007] criterion for the number of dynamic factors. By iteratively evaluating the criterion for different values of this constant, we achieve more robust results than in the case of fixed penalty function. This is shown by means of Monte Carlo simulations on seven data generating processes, including heteroskedastic processes, on samples of different size. Two empirical applications are carried out on a macroeconomic and a financial dataset.
- JEL Code
- C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection