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  • How to adjust static forecast to dynamic forecast based on VECM?

    I am forecasting some price based on VECM. My static forecast works fine, but by adjusting to a dynamic forecast, I get results that are not meaningful.
    Here is my code:
    // VECM on weekly data for time period 2010-2012 (lag selection based on AIC to avoid serial correlation, rank based on Johansen test)
    Code:
    vec lnprice lnx1 lnx2 lnx3 lnx4 lnx5 if d2010-2012==1, trend(constant) rank(3) lag(4)
    eststo evecm
    I now want to forecast lnprice for some time period (2000-2006) prior to the estimation period (2010-2012) to compare to actuals available:
    Code:
    //Create model
    forecast create fvecm, replace
    
    //Add estimation results VECM
    forecast estimates evecm  // 6 endogenous variables added
    
    // Identify the five exogenous variables
    forecast exogenous lnx1 lnx2 lnx3 lnx4 lnx5
    
    // Obtain static forecasts
    forecast solve, prefix(fcs) begin((w(2000w5))) end((w(2006w52)))  static
    A graph showing the static forecast of lnprice vs. actuals of lnprice shows meaningful results.

    Now I want to generate a dynamic forecast by adjusting the last command

    Code:
    forecast solve, prefix(fcd) begin((w(2000w5))) end((w(2006w52)))
    A graph showing the dynamic forecast reports some movement in the first periods and then changes to a linear slope.

    The -fcast- command does not work as the forecast period is prior to the estimation period.

    Any direction how to adjust for a dynamic forecast would be extremely helpful!

    Thanks in advance.
    Christian
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