Modeling and Forecasting by the Vector Autoregressive Moving Average Model for Export of Coal and Oil Data (Case Study from Indonesia over the Years 2002-2017)

Warsono Warsono, Edwin Russel, Wamiliana Wamiliana, Widiarti Widiarti, Mustofa Usman

Abstract


The vector autoregressive moving average (VARMA) model is one of the statistical analyses frequently used in several studies of multivariate time series data in economy, finance, and business. It is used in numerous studies because of its simplicity. Moreover, the VARMA model can explain the dynamic behavior of the relationship among endogenous and exogenous variables or among endogenous variables. It can also explain the impact of a variable or a set of variables by means of the impulse response function and Granger causality. Furthermore, it can be used to predict and forecast time series data. In this study, we will discuss and develop the best model that describes the relationship between two vectors of time series data export of Coal and data export of Oil in Indonesia over the period 2002–2017. Some models will be applied to the data: VARMA (1,1), VARMA (2,1), VARMA (3,1), and VARMA (4,1). On the basis of the comparison of these models using information criteria AICC, HQC, AIC, and SBC, it was found that the best model is VARMA (2,1) with restriction on some parameters: AR2_1_2=0, AR2_2_1=0, and MA1_2_1=0. The dynamic behavior of the data is studied through Granger causality analysis. The forecasting of the series data is also presented for the next 12 months.

Keywords: VARMA model, Information criteria, Granger causality, Forecasting

JEL Classifications: C53, Q4, Q47

DOI: https://doi.org/10.32479/ijeep.7605


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