Beware of the VAR: Using the Permanent Income Hypothesis as a basis for forecasting Swedish GDP
Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
This master thesis investigates whether consumption can serve as a predictor of future GDP output in Sweden. The forward looking behavior depicted by the Permanent Income Hypothesis means that consumers’ expectations about the future should affect consumption already today. Three different VAR-models and a simpler AR-model are evaluated over two medium-term forecasting horizons of one and two years, using two forecasting methods and for two lag specifications. The results indicate that consumption works fairly well as a predictor of Swedish GDP, although confidence in the industry sector is preferred for certain specifications.
Place, publisher, year, edition, pages
Permanent Income Hypothesis, iterated forecasts, direct forecasts, Swedish GDP, lag selection, co-integration
IdentifiersURN: urn:nbn:se:uu:diva-297492OAI: oai:DiVA.org:uu-297492DiVA: diva2:942044
Gottfries, Nils, Professor
Bengtsson, Niklas, Biträdande universitetslektor