VAR TIME SERIES ANALYSIS USING WAVELET SHRINKAGE WITH APPLICATION
DOI:
https://doi.org/10.25271/sjuoz.2024.12.3.1304Keywords:
Time Series, VAR, Wavelet, Threshold, Soft RuleAbstract
This study investigates the VAR time series data of the overall expenditures and income in the Kurdistan Region of Iraq. It applies multivariate wavelet shrinkage within the VAR model, comparing it to traditional methods to identify the most appropriate model. The chosen model will then be used to predict general expenditures and revenues for the years 2022-2026. The analysis involved assessing the stationarity of the expenditure and revenue time series, which are interrelated variables during the interval 1997-2021, and identifying the overall trend through differencing to achieve stationarity. The proposed method incorporated multivariate wavelet shrinkage in the VAR model to address data contamination in expenditures and revenue using various wavelets like Coiflets, Daubechies, Symlets, and Fejér–Korovkin at different orders. Threshold levels were estimated using the SURE method and soft thresholding rules to denoise the data for the following analysis within the VAR model. Model selection was based on Akaike and Bayes information criteria. The analysis, conducted using MATLAB, indicated the superiority of the proposed method over traditional methods, forecasting a continued rise in expenditures and revenues for the Iraqi Kurdistan region from 2022 to 2026. The findings suggest that advanced techniques can offer more accurate economic forecasts, benefiting regional planning and policy-making.
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