In this paper we give explicit expressions for the forecasts of levels of a vector time series when such forecasts are generated from (possibly cointegrated) vector autoregressions for the corresponding log-transformed time series. We also show that simply taking exponentials of forecasts for logged data leads to substantially biased forecasts. We illustrate this using a bivariate cointegrated vector series containing US GNP and investments.

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hdl.handle.net/1765/1399
Econometric Institute Research Papers
Erasmus School of Economics

Ariño, M., & Franses, P. H. (1996). Forecasting the Levels of Vector Autoregressive Log-Transformed Time Series (No. EI 9669-/A). Econometric Institute Research Papers. Retrieved from http://hdl.handle.net/1765/1399