Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow
The TSpVARX model can be used in inflation and money outflow forecasting by accommodating the reciprocal relationship among endogenous variables, the influence of exogenous variables, inter-regional linkages, and the nonlinearity of the relationship between endogenous and predetermined variables. Ho...
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MDPI AG
2024-12-01
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| author | Setiawan Setiawan Gama Putra Danu Sohibien Dedy Dwi Prastyo Muhammad Sjahid Akbar Anton Abdulbasah Kamil |
| author_facet | Setiawan Setiawan Gama Putra Danu Sohibien Dedy Dwi Prastyo Muhammad Sjahid Akbar Anton Abdulbasah Kamil |
| author_sort | Setiawan Setiawan |
| collection | DOAJ |
| description | The TSpVARX model can be used in inflation and money outflow forecasting by accommodating the reciprocal relationship among endogenous variables, the influence of exogenous variables, inter-regional linkages, and the nonlinearity of the relationship between endogenous and predetermined variables. However, the impact of some events, such as Eid al-Fitr and fuel price adjustments, still cannot be accommodated in the TSpVARX model. This condition causes inflation and money outflow forecasting using TSpVARX to be unsatisfactory. Our study is to improve the forecasting performance of the TSpVARX model by adding subset and dummy variables. We use a 12th lag subset variable to capture seasonal effects and a dummy variable to represent fuel price changes. These additions enhance the model’s accuracy in forecasting inflation and money outflow by accounting for recurring patterns and specific events, like fuel price changes. Based on the RMSE values of the training and testing data, we can conclude that forecasting inflation and money outflow using TSpVARX with the addition of subset and dummy variables is better than the regular TSpVARX. The inflation and money outflow forecasting generated after the addition of subset and dummy variables are also more fluctuating as in the movement of the actual data. |
| format | Article |
| id | doaj-art-db76c2d9cceb43089ca95e59123e826b |
| institution | Kabale University |
| issn | 2227-7099 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Economies |
| spelling | doaj-art-db76c2d9cceb43089ca95e59123e826b2024-12-27T14:22:20ZengMDPI AGEconomies2227-70992024-12-01121235210.3390/economies12120352Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money OutflowSetiawan Setiawan0Gama Putra Danu Sohibien1Dedy Dwi Prastyo2Muhammad Sjahid Akbar3Anton Abdulbasah Kamil4Department of Statistics, Faculty of Science and Data Analytics, Institut Teknologi Sepuluh Nopember, Surabaya 60119, IndonesiaDepartment of Applied Statistics, Politeknik Statistika STIS, Jakarta 13320, IndonesiaDepartment of Statistics, Faculty of Science and Data Analytics, Institut Teknologi Sepuluh Nopember, Surabaya 60119, IndonesiaDepartment of Statistics, Faculty of Science and Data Analytics, Institut Teknologi Sepuluh Nopember, Surabaya 60119, IndonesiaFaculty of Economics, Istanbul Gelisim University, Istanbul 34315, TurkeyThe TSpVARX model can be used in inflation and money outflow forecasting by accommodating the reciprocal relationship among endogenous variables, the influence of exogenous variables, inter-regional linkages, and the nonlinearity of the relationship between endogenous and predetermined variables. However, the impact of some events, such as Eid al-Fitr and fuel price adjustments, still cannot be accommodated in the TSpVARX model. This condition causes inflation and money outflow forecasting using TSpVARX to be unsatisfactory. Our study is to improve the forecasting performance of the TSpVARX model by adding subset and dummy variables. We use a 12th lag subset variable to capture seasonal effects and a dummy variable to represent fuel price changes. These additions enhance the model’s accuracy in forecasting inflation and money outflow by accounting for recurring patterns and specific events, like fuel price changes. Based on the RMSE values of the training and testing data, we can conclude that forecasting inflation and money outflow using TSpVARX with the addition of subset and dummy variables is better than the regular TSpVARX. The inflation and money outflow forecasting generated after the addition of subset and dummy variables are also more fluctuating as in the movement of the actual data.https://www.mdpi.com/2227-7099/12/12/352nonlinear time seriesthreshold spatialSpVARinflationsubset variableTSpVARX |
| spellingShingle | Setiawan Setiawan Gama Putra Danu Sohibien Dedy Dwi Prastyo Muhammad Sjahid Akbar Anton Abdulbasah Kamil Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow Economies nonlinear time series threshold spatial SpVAR inflation subset variable TSpVARX |
| title | Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow |
| title_full | Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow |
| title_fullStr | Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow |
| title_full_unstemmed | Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow |
| title_short | Addition of Subset and Dummy Variables in the Threshold Spatial Vector Autoregressive with Exogenous Variables Model to Forecast Inflation and Money Outflow |
| title_sort | addition of subset and dummy variables in the threshold spatial vector autoregressive with exogenous variables model to forecast inflation and money outflow |
| topic | nonlinear time series threshold spatial SpVAR inflation subset variable TSpVARX |
| url | https://www.mdpi.com/2227-7099/12/12/352 |
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