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Weighting schemes in global VAR modelling: a forecasting exercise

Martin, Florian and Crespo Cuaresma, Jesus (2017) Weighting schemes in global VAR modelling: a forecasting exercise. Letters in Spatial and Resource Sciences, 10 (1). pp. 45-56. ISSN 1864-4031

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Abstract

We provide a comprehensive analysis of the out-of-sample predictive accuracy of different global vector autoregressive (GVAR) specifications based on alternative weighting schemes to address global spillovers across countries. In addition to weights based on bilateral trade, we entertain schemes based on different financial variables and geodesic distance. Our results indicate that models based on trade weights, which are standard in the literature, are systematically outperformed in terms of predictive accuracy by other specifications. We find that, while information on financial linkages helps improve the forecasting accuracy of GVAR models, averaging predictions by means of simple predictive likelihood weighting does not appear to systematically lead to lower forecast errors.

Item Type: Article
Additional Information: This article is published with open access at Springerlink.com.
Keywords: Global VAR modelling / forecasting / global spillovers
Classification Codes: JEL C31, E44
Version of the Document: Published
Depositing User: ePub Administrator
Date Deposited: 04 Apr 2016 11:46
Last Modified: 06 Apr 2017 18:27
FIDES Link: https://bach.wu.ac.at/d/research/results/76291/
URI: http://epub.wu.ac.at/id/eprint/4958

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