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Forecasting in a Small and Unstable Regional Economy Using Regime Shifting Models: The Case of Extremadura
Author(s) -
Márquez Miguel Angel,
Ramajo Julian,
Hewings Geoffrey J. D.
Publication year - 2003
Publication title -
geographical analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 65
eISSN - 1538-4632
pISSN - 0016-7363
DOI - 10.1111/j.1538-4632.2003.tb01104.x
Subject(s) - cointegration , context (archaeology) , econometrics , econometric model , economics , work (physics) , construct (python library) , computer science , geography , engineering , mechanical engineering , archaeology , programming language
We consider forecasting in a small and unstable regional economy subject to structural breaks. In this context, we work with two types of regime‐shifting databased models using cointegration theory. The objective of the present work is to analyze the out‐of‐sample forecasting performance of the two approaches used to construct a short‐term regional econometric model: stochastic and deterministic time varying parameters models. The forecasting experiments will be illustrated by specifying, and estimating an econometric model for Extremadura, a small and unstable region in southwestern Spain.