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Monte Carlo forecast paths using a VECM model directly
Posted: Mon May 29, 2017 11:58 am
by holyw160
Hi, does any one have an example of simulated forecast paths (using monte carlo methods) of a variable from a vector error correction model?
Thank you.
Re: Monte Carlo forecast paths using a VECM model directly
Posted: Tue May 30, 2017 12:27 pm
by TomDoan
There's nothing special to that. Define and estimate a VECM (as in the ECT.RPF example), and do a SIMULATE instruction using the MODEL that you created and estimated. SIMULATE knows how to handle the structure of the VECM (that is, it will simulate the levels, not the differences).