THE USE OF VARMA MODELS IN FORECASTING MACROECONOMIC INDICATORS

Abstract

Although the scalar components methodology used to build VARMA models is rather difficult, the VAR models application being easier in practice, the forecasts based on the first models have a higher degree of accuracy. This statement is demonstrated for variables like the 3-month Treasury bill rate and the spread between the 10 year government bond yield, where the quarterly data are from the U.S. economy (horizon: first quarter of 2001 - second quarter of 2013). It was used a better measure of accuracy than those used in literature till now, the generalized forecast error of second moment, that was adapted to measure relative accuracy. [PUBLICATION ABSTRACT]