A Local Vector Autoregressive Framework and its Applications to Multivariate Time Series Monitoring and Forecasting
Ying Chen
National University of Singapore
Bo Li
Linlin Niu
Wang Yanan Institute for Studies in Economics (WISE)
5/6/2014 4:31:52 PM
Abstract:
Our proposed local vector autoregressive (LVAR) model has time-varying parameters that allow it to be safely used in both stationary and non-stationary situations. The estimation is conducted over an interval of local homogeneity where the parameters are approximately constant. The local interval is identified in a sequential testing procedure. Numerical analysis and real data application are conducted to illustrate the monitoring function and forecast performance of the proposed model.
Keyword: 
Adaptive estimation; Multivariate time series; Non-stationarity; Yield curve