Co-integration with score-driven models: an application to US real GDP growth, US inflation rate, and effective federal funds rate

Abstract

Nonlinear co-integration is studied for score-driven models, using a new multivariate dynamic conditional score/generalized autoregressive score model. The model is named t-QVARMA (quasi-vector autoregressive moving average model), which is a location model for the multivariate t-distribution. In t-QVARMA, I(0) and co-integrated I(1) components of the dependent variables are included. For t-QVARMA, the conditions of the maximum likelihood estimator and impulse response functions (IRFs) are presented. A limiting special case of t-QVARMA, named Gaussian-QVARMA, is a Gaussian-VARMA specification with I(0) and I(1) components. As an empirical application, the US real gross domestic product growth, US inflation rate, and effective federal funds rate are studied for the period of 1954 Q3 to 2020 Q2. Statistical performance and predictive accuracy of t-QVARMA are superior to those of Gaussian-VAR. Estimates of the short-run IRF, long-run IRF, and total IRF impacts for the US data are reported.

Exploring the impact of COVID-19 pandemic on Americans time use related subjective wellbeing

“…B.10 of Appendix B ), and are included as explanatory variables in the subsequent regression analysis. Due to the fact that people's time use can change as a result of technological and economic developments ( Ezell, 2021 ; Blazsek et al., 2021 ), we also identify the daily travel patterns for 2019 (Appendix, Fig. C.11 ) to verify if they are similar to 2013.…”

Robust Estimation and Forecasting of Climate Change Using Score-Driven Ice-Age Models

“…For technical details on the statistical inference of score-driven models, we refer to the works of Harvey and Chakravarty (2008), Harvey (2013), Creal et al (2008Creal et al ( , 2011Creal et al ( , 2013, and Blasques et al (2021). For the multivariate score-driven models (such as the score-driven ice-age models), we also refer to the recent works of Blazsek et al (2020Blazsek et al ( , 2021aBlazsek et al ( , 2021b.…”

Conservatorship, quantitative easing, and mortgage spreads: a new multi-equation score-driven model of policy actions

“…In the work of Creal et al (2014), the score-driven t-QVARMA model is introduced for I(0) variables. In the recent works of Blazsek, Escribano, and Licht (2020, 2021a, 2021b, the statistical performance of t-QVARMA is studied and the model is extended to combinations of I(0) and co-integrated I(1) variables, which are further extended in the present work to include exogenous explanatory variables.…”

“…In the following we summarize some of the ML conditions, for which we present empirical estimates in the following section. For the remaining conditions, we refer to the work of Blazsek, Escribano, and Licht (2021a).…”