A vector time series model of the form A(L)y(t)+B(L)x(t)=e(t), is known as a vector autoregressive model with exogenous variables (VARX model) and involves a regressand vector y(t) and a regressor vector x(t). This chapter provides a method for the recursive fitting of subset VARX models. It...

The necessary and sufficient condition to test for 'overall causality', i.e., the presence of Granger-causality and instantaneous causal relations, in a bivariate and trivariate autoregressive model with recursive form is discussed. It is argued that the conventional AR model (the reduced form...

This chapter uses a modified block Choleski decomposition method and tree pruning algorithms to attain the best multivariate subset autoregression for each size (number of non-zero coefficient matrices). Model selection criteria are then employed to select the optimum multivariate subset AR. A...

The recursive algorithm to select the optimum multivariate real subset autoregressive model (AR) [1] is generalized to apply to multichannel complex subset AR's. It is initiated by fitting all 'forward' and 'backward' one-lag AR's. The method then allows one to develop successively all complex...

The paper comprises the preface and chapter 1 of the book titled "Financial and Economic Forecasting" (Authors: Penm-Penm-Terrell; Publication date: October 2002). The preface provides explanatory remarks at the beginning of the book. It briefly introduces theoretical developments and empirical...

A vector autoregressive model with exogenous variables (VARX model) involves a regressand vector y(t) and a regressor vector x(t). This chapter provides a method for the recursive fitting of subset VARX models. It suggests the use of ascending recursions in conjunction with an order selection...

In this chapter, the hypotheses of purchasing power parity (PPP) and market efficiency are tested for the bilateral exchange rate between the New Taiwan (N.T.) and the US dollar. Different test results lead to the conclusion that, a PPP relationship over the long term cannot be rejected...

An effective and efficient search algorithm has been developed to select from an I(1) system zero-non-zero patterned cointegrating and loading vectors in a subset VECM, where the long term impact matrix contains zero entries. The Finnish money-output model presented by Johansen and Juselius...

The primary focus of this study will be an analysis of the causal links, and an assessment of the causal positioning of the significant variables involved in the interactions, between prices and exchange rates. Do exchange rate movements lead to associated price changes or do price changes lead...