Forecasting the Turkish private manufacturing sector price index: several VAR models vs single equation modeling

Abstract

T he purpose of this study is to forecast private manufacturing sector price index (WPIman) in the period 1982(1)-1996(5) using the public sector wholesale price index (WPIp), TL/Dollar Exchange Rate (E), M2Y and the private manufacturing sector production index (Qman) as the explanatory variables. Time series properties of these variables are tested and cointegration relationships are determined. Several VAR models are introduced and at the end a single equation analysis is conducted which utilized the long-run properties of data. Forecast parameter constancy is used as the main design criterion where the special interest is on 1994 crisis.