World economies, and especially European ones, have become strongly interconnected in the last decades and a joint modelling is required. We propose here the use of copulae to build flexible multivariate distributions, since they allow for a rich dependence structure and more flexible marginal distributions that better fit the features of empirical data, such as leptokurtosis. We use our approach to forecast industrial production series in the core European Monetary Union (EMU) countries and we provide evidence that the copula-Vector Autoregressio (VAR) model outperforms or at worst compares similarly to normal VAR models, keeping the same computational tractability of the latter approach.
A Copula-VAR-X Approach for Industrial Production Modelling and Forecasting
BIANCHI, CARLUCCIO;DE GIULI, MARIA ELENA;FANTAZZINI, DEAN;MAGGI, MARIO ALESSANDRO
2010-01-01
Abstract
World economies, and especially European ones, have become strongly interconnected in the last decades and a joint modelling is required. We propose here the use of copulae to build flexible multivariate distributions, since they allow for a rich dependence structure and more flexible marginal distributions that better fit the features of empirical data, such as leptokurtosis. We use our approach to forecast industrial production series in the core European Monetary Union (EMU) countries and we provide evidence that the copula-Vector Autoregressio (VAR) model outperforms or at worst compares similarly to normal VAR models, keeping the same computational tractability of the latter approach.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
