This paper investigates one-step ahead density forecasts of mixed causalnoncausal models. We compare the sample-based and the simulations-based approaches respectively developed by Gouriéroux and Jasiak (2016) and Lanne, Luoto, and Saikkonen (2012). We focus on explosive episodes and therefore on predicting turning points of bubbles bursts. We suggest the use of both methods to construct investment strategies based on how much probabilities are induced by the assumed model and by past behaviours. We illustrate our analysis on Nickel prices series.
This paper uses predictive densities obtained via mixed causalnoncausal autoregressive models to evaluate the statistical sustainability of Brazilian inflation targeting system with the tolerance bounds. The probabilities give an indication of the short-term credibility of the targeting system without requiring modelling people's beliefs. We also investigate the added value of including experts predictions of key macroeconomic variables.
This paper investigates oil price series using mixed causal-noncausal autoregressive (MAR) models, namely dynamic processes that depend not only on their lags but also on their leads. MAR models have been successfully implemented on commodity prices as they allow to generate nonlinear features such as speculative bubbles. We estimate the probabilities that bubbles in oil price series burst once the series enter an explosive phase. To do so we first evaluate how to adequately detrend nonstationary oil price series while preserving the bubble patterns observed in the raw data. The impact of different filters on the identification of MAR models as well as on forecasting bubble events is investigated using Monte Carlo simulations. We illustrate our findings on WTI and Brent monthly series.
This paper proposes concepts and methods to investigate whether the bubble patterns observed in individual time series are common among them. Having established the conditions under which common bubbles are present within the class of mixed causal–noncausal vector autoregressive models, we suggest statistical tools to detect the common locally explosive dynamics in a Student t-distribution maximum likelihood framework. The performances of both likelihood ratio tests and information criteria were investigated in a Monte Carlo study. Finally, we evaluated the practical value of our approach via an empirical application on three commodity prices.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.