Vars, Cointegration, and Common Cycle Restrictions [book]

Heather M. Anderson, Farshid Vahid
2011 Oxford Handbooks Online  
This paper argues that VAR models with cointegration and common cycles can be usefully viewed as observable factor models. The factors are linear combinations of lagged levels and lagged differences, and as such, these observable factors have potential for forecasting. We illustrate this forecast potential in both a Monte Carlo and empirical setting, and demonstrate the difficulties in developing forecasting "rules of thumb" for forecasting in multivariate systems.
doi:10.1093/oxfordhb/9780195398649.013.0002 fatcat:yiczoho6irhhzjamu3noy25rzu