This course introduces the use of time series methods for modelling and forecasting economic and financial variables relevant in a banking context. Forecasting is a key ingredient of decision making both in the public and in the private sector. It is particularly important in the context of banking, both for their management and for their supervision.
Banks’ assets and liabilities are influenced by a number of factors, such as general economic and financial conditions, interest rates, and the prices of financial assets. As these variables are the result of a vast, complex, dynamic and stochastic system, forecasting them is very difficult and forecast errors are unavoidable. Yet, forecast errors can be reduced and forecast precision enhanced by using proper econometric models and methods.
After having completed the course, you will have learned:
Empirical specification, estimation and evaluation of univariate ARIMA models and multivariate VAR models for macroeconomic and financial variables relevant in a banking context
Construction of point, interval and density forecasts
Shock identification and transmission
The interaction of short-run and long-run via ECM modelling