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MODELING MACROECONOMIC SUBAGGREGATES: AN APPLICATION OF NONLINEAR COINTEGRATION

Published online by Cambridge University Press:  01 April 2008

ADUSEI JUMAH  and
ROBERT M. KUNST
ADUSEI JUMAH*
Affiliation:
University of Vienna
ROBERT M. KUNST
Affiliation:
University of Vienna
*
Address correspondense to: Adusei Jumah, Department of Economics, University of Vienna, BWZ, Bruenner Strasse 72, 1210 Vienna, Austria. e-mail: adusei.jumah@univie.ac.at.
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Abstract

Many macroeconometric models depict situations where the shares of the major demand aggregates in output are stable over time. The joint dynamic behavior of the considered demand aggregate and output may thus be approximated by a cointegrated vector autoregression. However, the shares of many demand subaggregates in output are rather mobile and changing over time. In order to simultaneously capture the flexibility of the shares of the subaggregates and the long-run constancy of the share of the total aggregate, we consider trivariate systems of two macroeconomic subaggregates and output with error-correction terms that are nonlinear functions of the original variables. The merits of the models are evaluated by means of several forecasting experiments.

Keywords

National AccountsGreat RatiosForecastingPredictive Accuracy
Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 12 , Issue 2 , April 2008 , pp. 151 - 171
Copyright
Copyright © Cambridge University Press 2007

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