scholarly journals Forecasting Financial System Stability Using Vector Error Correction Model Approach

CAUCHY ◽  
2020 ◽  
Vol 6 (3) ◽  
pp. 109-116
Author(s):  
Setiawan Setiawan ◽  
Moch. Trianto Utomo ◽  
Alfira Mulya Astuti ◽  
M. Sjahid Akbar ◽  
Imam Safawi Ahmad
Keyword(s):  
Error Correction ◽  
Financial System ◽  
Developed Countries ◽  
System Stability ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Banking Stability ◽  
Index Value ◽  
Vector Error Correction Models

Indonesia is one of the developing countries whose economic system is still very dependent on other developed countries. This reliance often becomes one of the causes of the occurrence of economic turmoil sectors that interfere with financial system stability in Indonesia. Therefore, to forecast financial system stability indicators, primarily macroeconomic variables, become essential to do to provide an accurate index value. Then, Forecasting signs of stability of the financial system in Indonesia using Vector Error Correction models (VECM) approach with financial system stability indicators used are Banking Stability Inde

Buffered vector error-correction models: an application to the U.S. Treasury bond rates

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Renjie Lu ◽  
Philip L. H. Yu
Keyword(s):  
Error Correction ◽  
Bootstrap Method ◽  
Threshold Effect ◽  
Simulation Studies ◽  
Test Statistic ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Treasury Bond ◽  
Vector Error Correction Models

AbstractThis paper extends the buffered autoregressive model to the buffered vector error-correction model (VECM). Least squares estimation and a reduced-rank estimation are discussed, and the consistency of the estimators on the delay parameter and threshold parameters is derived. We also propose a supWald test for the presence of buffer-type threshold effect. Under the null hypothesis of no threshold, the supWald test statistic converges to a function of Gaussian process. A bootstrap method is proposed to obtain the p-value for the supWald test. We investigate the effectiveness of our methods by simulation studies. We apply our model to study the monthly Federal bond rates of United States. We find the evidences of buffering regimes and the asymmetric error-correction effect.

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