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simulate

Monte Carlo simulation of vector error-correction (VEC) model

Description

Conditional and Unconditional Simulation for Numeric Arrays

example

Y = simulate(Mdl,numobs) returns the numeric array Y containing a random numobs-period path of multivariate response series from performing an unconditional simulation of the fully specified VEC(p – 1) model Mdl.

example

Y = simulate(Mdl,numobs,Name=Value) uses additional options specified by one or more name-value arguments. simulate returns numeric arrays when all optional input data are numeric arrays. For example, simulate(Mdl,100,NumPaths=1000,Y0=PS) returns a numeric array of 1000, 100-period simulated response paths from Mdl and specifies the numeric array of presample response data PS.

To perform a conditional simulation, specify response data in the simulation horizon by using the YF name-value argument.

example

[Y,E] = simulate(___) also returns the numeric array containing the simulated multivariate model innovations series E corresponding to the simulated responses Y, using any input argument combination in the previous syntaxes.

Unconditional Simulation for Tables and Timetables

example

Tbl = simulate(Mdl,numobs,Presample=Presample) returns the table or timetable Tbl containing the random multivariate response and innovations variables, which results from the unconditional simulation of the response series in the model Mdl. simulate uses the table or timetable of presample data Presample to initialize the response series.

simulate selects the variables in Mdl.SeriesNames to simulate or all variables in Presample. To select different response variables in Presample to simulate, use the PresampleResponseVariables name-value argument.

example

Tbl = simulate(Mdl,numobs,Presample=Presample,Name=Value) uses additional options specified by one or more name-value arguments. For example, simulate(Mdl,100,Presample=PSTbl,PresampleResponseVariables=["GDP" "CPI"]) returns a timetable of variables containing 100-period simulated response and innovations series from Mdl, initialized by the data in the GDP and CPI variables of the timetable of presample data in PSTbl.

Conditional Simulation for Tables and Timetables

example

Tbl = simulate(Mdl,numobs,InSample=InSample,ReponseVariables=ResponseVariables) returns the table or timetable Tbl containing the random multivariate response and innovations variables, which results from the conditional simulation of the response series in the model Mdl. InSample is a table or timetable of response or predictor data in the simulation horizon that simulate uses to perform the conditional simulation and ResponseVariables specifies the response variables in InSample.

example

Tbl = simulate(Mdl,numobs,InSample=InSample,ReponseVariables=ResponseVariables,Presample=Presample) uses the presample data in the table or timetable Presample to initialize the model.

example

Tbl = simulate(___,Name=Value) uses additional options specified by one or more name-value arguments, using any input argument combination in the previous two syntaxes.

Examples

collapse all

Consider a VEC model for the following seven macroeconomic series, fit the model to the data, and then perform unconditional simulation by generating a random path of the response variables from the estimated model.

  • Gross domestic product (GDP)

  • GDP implicit price deflator

  • Paid compensation of employees

  • Nonfarm business sector hours of all persons

  • Effective federal funds rate

  • Personal consumption expenditures

  • Gross private domestic investment

Suppose that a cointegrating rank of 4 and one short-run term are appropriate, that is, consider a VEC(1) model.

Load the Data_USEconVECModel data set.

load Data_USEconVECModel

For more information on the data set and variables, enter Description at the command line.

Determine whether the data needs to be preprocessed by plotting the series on separate plots.

figure
tiledlayout(2,2)
nexttile
plot(FRED.Time,FRED.GDP)
title("Gross Domestic Product")
ylabel("Index")
xlabel("Date")
nexttile
plot(FRED.Time,FRED.GDPDEF)
title("GDP Deflator")
ylabel("Index")
xlabel("Date")
nexttile
plot(FRED.Time,FRED.COE)
title("Paid Compensation of Employees")
ylabel("Billions of $")
xlabel("Date")
nexttile
plot(FRED.Time,FRED.HOANBS)
title("Nonfarm Business Sector Hours")
ylabel("Index")
xlabel("Date")

Figure contains 4 axes objects. Axes object 1 with title Gross Domestic Product contains an object of type line. Axes object 2 with title GDP Deflator contains an object of type line. Axes object 3 with title Paid Compensation of Employees contains an object of type line. Axes object 4 with title Nonfarm Business Sector Hours contains an object of type line.

figure
tiledlayout(2,2)
nexttile
plot(FRED.Time,FRED.FEDFUNDS)
title("Federal Funds Rate")
ylabel("Percent")
xlabel("Date")
nexttile
plot(FRED.Time,FRED.PCEC)
title("Consumption Expenditures")
ylabel("Billions of $")
xlabel("Date")
nexttile
plot(FRED.Time,FRED.GPDI)
title("Gross Private Domestic Investment")
ylabel("Billions of $")
xlabel("Date")

Figure contains 3 axes objects. Axes object 1 with title Federal Funds Rate contains an object of type line. Axes object 2 with title Consumption Expenditures contains an object of type line. Axes object 3 with title Gross Private Domestic Investment contains an object of type line.

Stabilize all series, except the federal funds rate, by applying the log transform. Scale the resulting series by 100 so that all series are on the same scale.

FRED.GDP = 100*log(FRED.GDP);      
FRED.GDPDEF = 100*log(FRED.GDPDEF);
FRED.COE = 100*log(FRED.COE);       
FRED.HOANBS = 100*log(FRED.HOANBS); 
FRED.PCEC = 100*log(FRED.PCEC);     
FRED.GPDI = 100*log(FRED.GPDI);

Create a VECM(1) model using the shorthand syntax. Specify the variable names.

Mdl = vecm(7,4,1);
Mdl.SeriesNames = FRED.Properties.VariableNames
Mdl = 
  vecm with properties:

             Description: "7-Dimensional Rank = 4 VEC(1) Model with Linear Time Trend"
             SeriesNames: "GDP"  "GDPDEF"  "COE"  ... and 4 more
               NumSeries: 7
                    Rank: 4
                       P: 2
                Constant: [7×1 vector of NaNs]
              Adjustment: [7×4 matrix of NaNs]
           Cointegration: [7×4 matrix of NaNs]
                  Impact: [7×7 matrix of NaNs]
   CointegrationConstant: [4×1 vector of NaNs]
      CointegrationTrend: [4×1 vector of NaNs]
                ShortRun: {7×7 matrix of NaNs} at lag [1]
                   Trend: [7×1 vector of NaNs]
                    Beta: [7×0 matrix]
              Covariance: [7×7 matrix of NaNs]

Mdl is a vecm model object. All properties containing NaN values correspond to parameters to be estimated given data.

Estimate the model using the entire data set and the default options.

EstMdl = estimate(Mdl,FRED.Variables)
EstMdl = 
  vecm with properties:

             Description: "7-Dimensional Rank = 4 VEC(1) Model"
             SeriesNames: "GDP"  "GDPDEF"  "COE"  ... and 4 more
               NumSeries: 7
                    Rank: 4
                       P: 2
                Constant: [14.1329 8.77841 -7.20359 ... and 4 more]'
              Adjustment: [7×4 matrix]
           Cointegration: [7×4 matrix]
                  Impact: [7×7 matrix]
   CointegrationConstant: [-28.6082 109.555 -77.0912 ... and 1 more]'
      CointegrationTrend: [4×1 vector of zeros]
                ShortRun: {7×7 matrix} at lag [1]
                   Trend: [7×1 vector of zeros]
                    Beta: [7×0 matrix]
              Covariance: [7×7 matrix]

EstMdl is an estimated vecm model object. It is fully specified because all parameters have known values. By default, estimate imposes the constraints of the H1 Johansen VEC model form by removing the cointegrating trend and linear trend terms from the model. Parameter exclusion from estimation is equivalent to imposing equality constraints to zero.

Simulate a response series path from the estimated model with length equal to the path in the data.

rng(1); % For reproducibility
numobs = size(FRED,1);
Y = simulate(EstMdl,numobs);

Y is a 240-by-7 matrix of simulated responses. Columns correspond to the variable names in EstMdl.SeriesNames.

Illustrate the relationship between simulate and filter by estimating a 4-D VEC(1) model of the four response series in Johansen's Danish data set. Simulate a single path of responses using the fitted model and the historical data as initial values, and then filter a random set of Gaussian disturbances through the estimated model using the same presample responses.

Load Johansen's Danish economic data.

load Data_JDanish

For details on the variables, enter Description.

Create a default 4-D VEC(1) model. Assume that a cointegrating rank of 1 is appropriate.

Mdl = vecm(4,1,1);
Mdl.SeriesNames = DataTable.Properties.VariableNames
Mdl = 
  vecm with properties:

             Description: "4-Dimensional Rank = 1 VEC(1) Model with Linear Time Trend"
             SeriesNames: "M2"  "Y"  "IB"  ... and 1 more
               NumSeries: 4
                    Rank: 1
                       P: 2
                Constant: [4×1 vector of NaNs]
              Adjustment: [4×1 matrix of NaNs]
           Cointegration: [4×1 matrix of NaNs]
                  Impact: [4×4 matrix of NaNs]
   CointegrationConstant: NaN
      CointegrationTrend: NaN
                ShortRun: {4×4 matrix of NaNs} at lag [1]
                   Trend: [4×1 vector of NaNs]
                    Beta: [4×0 matrix]
              Covariance: [4×4 matrix of NaNs]

Estimate the VEC(1) model using the entire data set. Specify the H1* Johansen model form.

EstMdl = estimate(Mdl,Data,Model="H1*");

When reproducing the results of simulate and filter, it is important to take these actions.

  • Set the same random number seed using rng.

  • Specify the same presample response data using the Y0 name-value argument.

Simulate 100 observations by passing the estimated model to simulate. Specify the entire data set as the presample.

rng("default")
YSim = simulate(EstMdl,100,Y0=Data);

YSim is a 100-by-4 matrix of simulated responses. Columns correspond to the columns of the variables in EstMdl.SeriesNames.

Set the default random seed. Simulate 4 series of 100 observations from the standard Gaussian distribution.

rng("default")
Z = randn(100,4);

Filter the Gaussian values through the estimated model. Specify the entire data set as the presample.

YFilter = filter(EstMdl,Z,Y0=Data);

YFilter is a 100-by-4 matrix of simulated responses. Columns correspond to the columns of the variables in EstMdl.SeriesNames. Before filtering the disturbances, filter scales Z by the lower triangular Cholesky factor of the model covariance in EstMdl.Covariance.

Compare the resulting responses between filter and simulate.

(YSim - YFilter)'*(YSim - YFilter)
ans = 4×4

     0     0     0     0
     0     0     0     0
     0     0     0     0
     0     0     0     0

The results are identical.

Consider this VEC(1) model for three hypothetical response series.

Δyt=c+AByt-1+Φ1Δyt-1+εt=[-1-3-30]+[-0.30.3-0.20.1-10][0.1-0.20.2-0.70.50.2]yt-1+[00.10.20.2-0.200.7-0.20.3]Δyt-1+εt.

The innovations are multivariate Gaussian with a mean of 0 and the covariance matrix

Σ=[1.30.41.60.40.60.71.60.75].

Create variables for the parameter values.

A = [-0.3 0.3; -0.2 0.1; -1 0];                 % Adjustment
B = [0.1 -0.7; -0.2 0.5; 0.2 0.2];              % Cointegration
Phi = {[0. 0.1 0.2; 0.2 -0.2 0; 0.7 -0.2 0.3]}; % ShortRun
c = [-1; -3; -30];                              % Constant
tau = [0; 0; 0];                                % Trend
Sigma = [1.3 0.4 1.6; 0.4 0.6 0.7; 1.6 0.7 5];  % Covariance

Create a vecm model object representing the VEC(1) model using the appropriate name-value pair arguments.

Mdl = vecm(Adjustment=A,Cointegration=B, ...
    Constant=c,ShortRun=Phi,Trend=tau,Covariance=Sigma);

Mdl is effectively a fully specified vecm model object. That is, the cointegration constant and linear trend are unknown, but are not needed for simulating observations or forecasting given that the overall constant and trend parameters are known.

Simulate 1000 paths of 100 observations. Return the innovations (scaled disturbances).

rng(1); % For reproducibility
numpaths = 1000;
numobs = 100;
[Y,E] = simulate(Mdl,numobs,NumPaths=numpaths);

Y is a 100-by-3-by-1000 matrix of simulated responses. E is a matrix whose dimensions correspond to the dimensions of Y, but represents the simulated, scaled disturbances. Columns correspond to the response variable names Mdl.SeriesNames.

For each time point, compute the mean vector of the simulated responses among all paths.

MeanSim = mean(Y,3);

MeanSim is a 100-by-7 matrix containing the average of the simulated responses at each time point.

Plot the simulated responses and their averages, and plot the simulated innovations.

figure
tiledlayout(2,2)
for j = 1:numel(Mdl.SeriesNames)
    nexttile
    h1 = plot(squeeze(Y(:,j,:)),Color=[0.8 0.8 0.8]);
    hold on
    h2 = plot(MeanSim(:,j),Color="k",LineWidth=2);
    hold off
    title(Mdl.SeriesNames{j});
    legend([h1(1) h2],["Simulated" "Mean"])
end

Figure contains 3 axes objects. Axes object 1 with title Y1 contains 1001 objects of type line. These objects represent Simulated, Mean. Axes object 2 with title Y2 contains 1001 objects of type line. These objects represent Simulated, Mean. Axes object 3 with title Y3 contains 1001 objects of type line. These objects represent Simulated, Mean.

figure
tiledlayout(2,2)
for j = 1:numel(Mdl.SeriesNames)
    nexttile
    h1 = plot(squeeze(E(:,j,:)),Color=[0.8 0.8 0.8]);
    hold on
    yline(0,"r--")
    title("Innovations: " + Mdl.SeriesNames{j})
end

Figure contains 3 axes objects. Axes object 1 with title Innovations: Y1 contains 1001 objects of type line, constantline. Axes object 2 with title Innovations: Y2 contains 1001 objects of type line, constantline. Axes object 3 with title Innovations: Y3 contains 1001 objects of type line, constantline.

Consider a VEC model for the following seven macroeconomic series, and then fit the model to a timetable of response data. This example is based on Return Response Series in Matrix from Unconditional Simulation.

Load and Preprocess Data

Load the Data_USEconVECModel data set.

load Data_USEconVECModel

DTT = FRED;
DTT.GDP = 100*log(DTT.GDP);      
DTT.GDPDEF = 100*log(DTT.GDPDEF);
DTT.COE = 100*log(DTT.COE);       
DTT.HOANBS = 100*log(DTT.HOANBS); 
DTT.PCEC = 100*log(DTT.PCEC);     
DTT.GPDI = 100*log(DTT.GPDI);

Prepare Timetable for Estimation

When you plan to supply a timetable directly to estimate, you must ensure it has all the following characteristics:

  • All selected response variables are numeric and do not contain any missing values.

  • The timestamps in the Time variable are regular, and they are ascending or descending.

Remove all missing values from the table.

DTT = rmmissing(DTT);
T = height(DTT)
T = 240

DTT does not contain any missing values.

Determine whether the sampling timestamps have a regular frequency and are sorted.

areTimestampsRegular = isregular(DTT,"quarters")
areTimestampsRegular = logical
   0

areTimestampsSorted = issorted(DTT.Time)
areTimestampsSorted = logical
   1

areTimestampsRegular = 0 indicates that the timestamps of DTT are irregular. areTimestampsSorted = 1 indicates that the timestamps are sorted. Macroeconomic series in this example are timestamped at the end of the month. This quality induces an irregularly measured series.

Remedy the time irregularity by shifting all dates to the first day of the quarter.

dt = DTT.Time;
dt = dateshift(dt,"start","quarter");
DTT.Time = dt;

DTT is regular with respect to time.

Create Model Template for Estimation

Create a VEC(1) model using the shorthand syntax. Specify the variable names.

Mdl = vecm(7,4,1);
Mdl.SeriesNames = DTT.Properties.VariableNames;

Mdl is a vecm model object. All properties containing NaN values correspond to parameters to be estimated given data.

Fit Model to Data

Estimate the model by supplying the timetable of data DTT. By default, because the number of variables in Mdl.SeriesNames is the number of variables in DTT, estimate fits the model to all the variables in DTT.

EstMdl = estimate(Mdl,DTT);
p = EstMdl.P
p = 2

EstMdl is an estimated vecm model object.

Perform Unconditional Simulation of Estimated Model

Simulate a response and innovations path from the estimated model and return the simulated series as variables in a timetable. simulate requires information for the output timetable, such as variable names, sampling times for the simulation horizon, and sampling frequency. Therefore, supply a presample of the earliest p = 2 observations of the data DTT, from which simulate infers the required timetable information. Specify a simulation horizon of numobs - p.

rng(1) % For reproducibility
PSTbl = DTT(1:p,:);
T = T - p;
Tbl = simulate(EstMdl,T,Presample=PSTbl);
size(Tbl)
ans = 1×2

   238    14

PSTbl
PSTbl=2×7 timetable
       Time         GDP      GDPDEF     COE      HOANBS    FEDFUNDS     PCEC      GPDI 
    ___________    ______    ______    ______    ______    ________    ______    ______

    01-Jan-1957     615.4    280.25     556.3    400.29      2.96       564.3    435.29
    01-Apr-1957    615.87    280.95    557.03    400.07         3      565.11    435.54

head(Tbl)
       Time        GDP_Responses    GDPDEF_Responses    COE_Responses    HOANBS_Responses    FEDFUNDS_Responses    PCEC_Responses    GPDI_Responses    GDP_Innovations    GDPDEF_Innovations    COE_Innovations    HOANBS_Innovations    FEDFUNDS_Innovations    PCEC_Innovations    GPDI_Innovations
    ___________    _____________    ________________    _____________    ________________    __________________    ______________    ______________    _______________    __________________    _______________    __________________    ____________________    ________________    ________________

    01-Jul-1957       616.84             281.66            557.71             400.25               4.2485              566.28            434.68           -0.48121              0.20806            -0.61665              0.18593                0.76536              -0.27865             -1.4663    
    01-Oct-1957       619.27             282.31            559.72             400.14               4.0194              567.96            437.93            0.87578             0.087449             0.57148             -0.11607               -0.49734               0.41769              1.1751    
    01-Jan-1958       620.08             282.64            561.48             400.26                4.213              569.24            436.02           -0.56236             -0.12462             0.29936              0.13665               -0.36138              -0.16951             -2.7145    
    01-Apr-1958       620.73             282.94            562.02                400               4.2137              570.22            435.64           -0.82272            -0.074885            -0.56525             -0.36422               -0.15674              -0.25453             -2.5725    
    01-Jul-1958       621.25             283.36            562.07             400.21               4.2975              570.96             433.7           -0.62693             0.079973             -1.0419              0.33534                0.29843              -0.38226             -2.7238    
    01-Oct-1958        621.9             284.06            562.91             399.89               3.1839              571.64            431.99            -0.4246               0.3155             -0.2015            -0.080769               -0.99093              -0.27001             -2.4234    
    01-Jan-1959       622.57             284.44            564.48             399.68               4.0431              572.48            431.76           -0.41423            -0.093221             0.80092              0.30483                0.51348              -0.23757           -0.064299    
    01-Apr-1959       624.12                285             566.1              399.1               5.4039              574.44            432.44            0.13226              0.17348             0.88597             -0.46611                 1.6584               0.88675             -1.7633    

Tbl is a 238-by-14 matrix of simulated responses (denoted responseVariable_Responses) and corresponding innovations (denoted responseVariable_Innovations). The timestamps of Tbl follow directly from the timestamps of PSTbl, and they have the same sampling frequency.

Consider the model and data in Return Response Series in Matrix from Unconditional Simulation.

Load the Data_USEconVECModel data set.

load Data_USEconVECModel

The Data_Recessions data set contains the beginning and ending serial dates of recessions. Load this data set. Convert the matrix of date serial numbers to a datetime array.

load Data_Recessions
dtrec = datetime(Recessions,ConvertFrom="datenum");

Remove the exponential trend from the series, and then scale them by a factor of 100.

DTT = FRED;
DTT.GDP = 100*log(DTT.GDP);      
DTT.GDPDEF = 100*log(DTT.GDPDEF);
DTT.COE = 100*log(DTT.COE);       
DTT.HOANBS = 100*log(DTT.HOANBS); 
DTT.PCEC = 100*log(DTT.PCEC);     
DTT.GPDI = 100*log(DTT.GPDI);

Create a dummy variable that identifies periods in which the U.S. was in a recession or worse. Specifically, the variable should be 1 if FRED.Time occurs during a recession, and 0 otherwise. Include the variable with the FRED data.

isin = @(x)(any(dtrec(:,1) <= x & x <= dtrec(:,2)));
DTT.IsRecession = double(arrayfun(isin,DTT.Time));

Remove all missing values from the table.

DTT = rmmissing(DTT);

To make the series regular, shift all dates to the first day of the quarter.

dt = DTT.Time;
dt = dateshift(dt,"start","quarter");
DTT.Time = dt;

DTT is regular with respect to time.

Create separate presample and estimation sample data sets. The presample contains the earliest p = 2 observations, and the estimation sample contains the rest of the data.

p = 2;
PSTbl = DTT(1:p,:);
InSample = DTT((p+1):end,:);
prednames = "IsRecession";

Create a VEC(1) model using the shorthand syntax. Assume that the appropriate cointegration rank is 4. You do not have to specify the presence of a regression component when creating the model. Specify the variable names.

Mdl = vecm(7,4,p-1);
Mdl.SeriesNames = DTT.Properties.VariableNames(1:end-1);

Estimate the model using the entire in-sample data InSample, and specify the presample PSTbl. Specify the predictor identifying whether the observation was measured during a recession.

EstMdl = estimate(Mdl,InSample,PredictorVariables="IsRecession", ...
    Presample=PSTbl);

Generate 100 random response and innovations paths from the estimated model by performing an unconditional simulation. Specify that the length of the paths is the same as the length of the estimation sample period. Supply the presample and estimation sample data, and specify the predictor variable name.

rng(1) % For reproducibility
numpaths = 100;
numobs = height(InSample);
Tbl = simulate(EstMdl,numobs,NumPaths=numpaths, ...
    Presample=PSTbl,InSample=InSample,PredictorVariables=prednames);
size(Tbl)
ans = 1×2

   238    22

head(Tbl(:,endsWith(Tbl.Properties.VariableNames,["_Responses" "Innovations"])))
       Time        GDP_Responses    GDPDEF_Responses    COE_Responses    HOANBS_Responses    FEDFUNDS_Responses    PCEC_Responses    GPDI_Responses    GDP_Innovations    GDPDEF_Innovations    COE_Innovations    HOANBS_Innovations    FEDFUNDS_Innovations    PCEC_Innovations    GPDI_Innovations
    ___________    _____________    ________________    _____________    ________________    __________________    ______________    ______________    _______________    __________________    _______________    __________________    ____________________    ________________    ________________

    01-Jul-1957    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Oct-1957    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Jan-1958    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Apr-1958    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Jul-1958    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Oct-1958    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Jan-1959    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Apr-1959    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  

Tbl is a 238-by-22 timetable of estimation sample data, simulated responses (denoted responseName_Responses) and corresponding innovations (denoted responseName_Innovations). The simulated response and innovations variables are 238-by-100 matrices, where wach row is a period in the estimation sample and each column is a separate, independently generated path.

For each time in the estimation sample, compute the mean vector of the simulated responses among all paths.

idx = endsWith(Tbl.Properties.VariableNames,"_Responses");
simrespnames = Tbl.Properties.VariableNames(idx);
MeanSim = varfun(@(x)mean(x,2),Tbl,InputVariables=simrespnames);

MeanSim is a 238-by-7 timetable containing the average of the simulated responses at each time point.

Plot the simulated responses, their averages, and the data.

figure
tiledlayout(2,2)
for j = 1:4
    nexttile
    plot(Tbl.Time,Tbl{:,simrespnames(j)},Color=[0.8,0.8,0.8])
    title(Mdl.SeriesNames{j});
    hold on
    h1 = plot(Tbl.Time,Tbl{:,Mdl.SeriesNames(j)});
    h2 = plot(Tbl.Time,MeanSim{:,"Fun_"+simrespnames(j)});
    hold off
end

Figure contains 4 axes objects. Axes object 1 with title GDP contains 102 objects of type line. Axes object 2 with title GDPDEF contains 102 objects of type line. Axes object 3 with title COE contains 102 objects of type line. Axes object 4 with title HOANBS contains 102 objects of type line.

figure
tiledlayout(2,2)
for j = 5:7
    nexttile
    plot(Tbl.Time,Tbl{:,simrespnames(j)},Color=[0.8,0.8,0.8])
    title(Mdl.SeriesNames{j});
    hold on
    h1 = plot(Tbl.Time,Tbl{:,Mdl.SeriesNames(j)});
    h2 = plot(Tbl.Time,MeanSim{:,"Fun_"+simrespnames(j)});
    hold off
end

Figure contains 3 axes objects. Axes object 1 with title FEDFUNDS contains 102 objects of type line. Axes object 2 with title PCEC contains 102 objects of type line. Axes object 3 with title GPDI contains 102 objects of type line.

Perform a conditional simulation of the VEC model in Return Response Series in Matrix from Unconditional Simulation, in which economists hypothesize that the effective federal funds rate is 0.5% for 12 quarters after the end of the sampling period (from Q1 of 2017 through Q4 of 2019).

Load and Preprocess Data

Load the Data_USEconVECModel data set.

load Data_USEconVECModel

DTT = FRED;
DTT.GDP = 100*log(DTT.GDP);      
DTT.GDPDEF = 100*log(DTT.GDPDEF);
DTT.COE = 100*log(DTT.COE);       
DTT.HOANBS = 100*log(DTT.HOANBS); 
DTT.PCEC = 100*log(DTT.PCEC);     
DTT.GPDI = 100*log(DTT.GPDI);

Prepare Timetable for Estimation

Remove all missing values from the table.

DTT = rmmissing(DTT);

To make the series regular, shift all dates to the first day of the quarter.

dt = DTT.Time;
dt = dateshift(dt,"start","quarter");
DTT.Time = dt;

DTT is regular with respect to time.

Create Model Template for Estimation

Create a VEC(1) model using the shorthand syntax. Specify the variable names.

Mdl = vecm(7,4,1);
Mdl.SeriesNames = DTT.Properties.VariableNames;

Mdl is a vecm model object. All properties containing NaN values correspond to parameters to be estimated given data.

Fit Model to Data

Estimate the model. Pass the entire timetable DTT. Because the VEC model is 7-D and the estimation data contains seven variables, estimate selects all response variables in the data by default. Alternatively, you can use the ResponseVariables name-value argument.

EstMdl = estimate(Mdl,DTT);

Prepare for Conditional Simulation of Estimated Model

Suppose economists hypothesize that the effective federal funds rate will be at 0.5% for the next 12 quarters.

Create a timetable with the following qualities:

  1. The timestamps are regular with respect to the estimation sample timestamps and they are ordered from Q1 of 2017 through Q4 of 2019.

  2. All variables of DTT, except for FEDFUNDS, are a 12-by-1 vector of NaN values.

  3. FEDFUNDS is a 12-by-1 vector, where each element is 0.5.

numobs = 12;
shdt = DTT.Time(end) + calquarters(1:numobs);
DTTCondSim = retime(DTT,shdt,"fillwithmissing");
DTTCondSim.FEDFUNDS = 0.5*ones(numobs,1);

DTTCondSim is a 12-by-7 timetable that follows directly, in time, from DTT, and both timetables have the same variables. All variables in DTTCondSim contain NaN values, except for FEDFUNDS, which is a vector composed of the value 0.5.

Perform Conditional Simulation of Estimated Model

Simulate all variables given the hypothesis by supplying the conditioning data DTTCondSim and specifying the response variable names. Generate 100 paths. Because the simulation horizon is beyond the estimation sample data, supply the estimation sample as a presample to initialize the model.

rng(1) % For reproducibility
Tbl = simulate(EstMdl,numobs,NumPaths=100, ...
    InSample=DTTCondSim,ResponseVariables=EstMdl.SeriesNames, ...
    Presample=DTT,PresampleResponseVariables=EstMdl.SeriesNames);
size(Tbl)
ans = 1×2

    12    21

idx = endsWith(Tbl.Properties.VariableNames,["_Responses" "_Innovations"]);
head(Tbl(:,idx))
       Time        GDP_Responses    GDPDEF_Responses    COE_Responses    HOANBS_Responses    FEDFUNDS_Responses    PCEC_Responses    GPDI_Responses    GDP_Innovations    GDPDEF_Innovations    COE_Innovations    HOANBS_Innovations    FEDFUNDS_Innovations    PCEC_Innovations    GPDI_Innovations
    ___________    _____________    ________________    _____________    ________________    __________________    ______________    ______________    _______________    __________________    _______________    __________________    ____________________    ________________    ________________

    01-Jan-2017    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Apr-2017    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Jul-2017    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Oct-2017    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Jan-2018    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Apr-2018    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Jul-2018    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  
    01-Oct-2018    1x100 double       1x100 double      1x100 double       1x100 double         1x100 double        1x100 double      1x100 double      1x100 double         1x100 double        1x100 double         1x100 double           1x100 double          1x100 double        1x100 double  

Tbl is a 12-by-21 matrix of simulated responses and innovations of all variables in the simulation horizon, given FEDFUNDS is 0.5%. GDP_Responses contains the simulated paths of the transformed GDP and GDP_Innovations contains the corresponding innovations series. FEDFUNDS_Responses is a 12-by-100 matrix composed of the value 0.5.

Plot the simulated values of the variables and their period-wise means.

idx = (endsWith(Tbl.Properties.VariableNames,"_Responses") + ...
    ~startsWith(Tbl.Properties.VariableNames,"FEDFUNDS")) == 2;
simrespnames = Tbl.Properties.VariableNames(idx);
MeanSim = varfun(@(x)mean(x,2),Tbl,InputVariables=simrespnames);

figure
tiledlayout(3,2)
for j = simrespnames
    nexttile
    h1 = plot(Tbl.Time,Tbl{:,j},Color=[0.8,0.8,0.8]);
    title(erase(j,"_Responses"));
    hold on
    h2 = plot(Tbl.Time,MeanSim{:,"Fun_"+j});
    hold off
end
hl = legend([h1(1) h2],"Simulation","Simulation Mean", ...
    Location="northwest");

Figure contains 6 axes objects. Axes object 1 with title GDP contains 101 objects of type line. Axes object 2 with title GDPDEF contains 101 objects of type line. Axes object 3 with title COE contains 101 objects of type line. Axes object 4 with title HOANBS contains 101 objects of type line. Axes object 5 with title PCEC contains 101 objects of type line. Axes object 6 with title GPDI contains 101 objects of type line. These objects represent Simulation, Simulation Mean.

Input Arguments

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VEC model, specified as a vecm model object created by vecm or estimate. Mdl must be fully specified.

Number of random observations to generate per output path, specified as a positive integer. The output arguments Y and E, or Tbl, have numobs rows.

Data Types: double

Presample data that provides initial values for the model Mdl, specified as a table or timetable with numprevars variables and numpreobs rows. The following situations describe when to use Presample:

  • Presample is required when simulate performs an unconditional simulation, which occurs under one of the following conditions:

    • You do not supply data in the simulation horizon (that is, you do not use the InSample name-value argument).

    • You specify only predictor data for the model regression component in the simulation horizon using the InSample and PredictorVariables name-value arguments, but you do not select any response variables from InSample.

  • Presample is optional when simulate performs a conditional simulation, that is, when you supply response data in the simulation horizon, on which to condition the simulated responses, by using the InSample and ResponseVariables name-value arguments. The default, simulate sets any necessary presample observations.

    • For stationary VAR processes without regression components, simulate sets presample observations to the unconditional mean μ=Φ1(L)c.

    • For nonstationary processes or models that contain a regression component, simulate sets presample observations to zero.

Regardless of the situation, simulate returns the simulated variables in the output table or timetable Tbl, which is commensurate with Presample.

Each row is a presample observation, and measurements in each row, among all paths, occur simultaneously. numpreobs must be at least Mdl.P. If you supply more rows than necessary, simulate uses the latest Mdl.P observations only.

Each variable is a numpreobs-by-numprepaths numeric matrix. Variables are associated with response series in Mdl.SeriesNames. To control presample variable selection, see the optional PresampleResponseVariables name-value argument.

For each variable, columns are separate, independent paths.

  • If variables are vectors, simulate applies them to each respective path to initialize the model for the simulation. Therefore, all respective response paths derive from common initial conditions.

  • Otherwise, for each variable ResponseK and each path j, simulate applies Presample.ResponseK(:,j) to produce Tbl.ResponseK(:,j). Variables must have at least numpaths columns, and simulate uses only the first numpaths columns.

If Presample is a timetable, all the following conditions must be true:

  • Presample must represent a sample with a regular datetime time step (see isregular).

  • The inputs InSample and Presample must be consistent in time such that Presample immediately precedes InSample with respect to the sampling frequency and order.

  • The datetime vector of sample timestamps Presample.Time must be ascending or descending.

If Presample is a table, the following conditions hold:

  • The last row contains the latest presample observation.

  • Presample.Properties.RowsNames must be empty.

Future time series response or predictor data, specified as a table or timetable. InSample contains numvars variables, including numseries response variables yt or numpreds predictor variables xt for the model regression component. You can specify InSample only when other data inputs are tables or timetables.

Use InSample in the following situations:

  • Perform conditional simulation. You must also supply the response variable names in InSample by using the ResponseVariables name-value argument.

  • Supply future predictor data for either unconditional or conditional simulation. To supply predictor data, you must specify predictor variable names in InSample by using the PredictorVariables name-value argument. Otherwise, simulate ignores the model regression component.

simulate returns the simulated variables in the output table or timetable Tbl, which is commensurate with InSample.

Each row corresponds to an observation in the simulation horizon, the first row is the earliest observation, and measurements in each row, among all paths, occur simultaneously. InSample must have at least numobs rows to cover the simulation horizon. If you supply more rows than necessary, simulate uses only the first numobs rows.

Each response variable is a numeric matrix with numpaths columns. For each response variable K, columns are separate, independent paths. Specifically, path j of response variable ResponseK captures the state, or knowledge, of ResponseK as it evolves from the presample past (for example, Presample.ResponseK) into the future. For each selected response variable ResponseK:

  • If InSample.ResponseK is a vector, simulate applies to each of the numpaths output paths (see NumPaths).

  • Otherwise, InSample.ResponseK must have at least numpaths columns. If you supply more pages than necessary, simulate uses only the first numpaths columns.

Each predictor variable is a numeric vector. All predictor variables are present in the regression component of each response equation and apply to all response paths.

If InSample is a timetable, the following conditions apply:

  • InSample must represent a sample with a regular datetime time step (see isregular).

  • The datetime vector InSample.Time must be strictly ascending or descending.

  • Presample must immediately precede InSample, with respect to the sampling frequency.

If InSample is a table, the following conditions hold:

  • The last row contains the latest observation.

  • InSample.Properties.RowsNames must be empty.

Elements of the response variables of InSample can be numeric scalars or missing values (indicated by NaN values). simulate treats numeric scalars as deterministic future responses that are known in advance, for example, set by policy. simulate simulates responses for corresponding NaN values conditional on the known values. Elements of selected predictor variables must be numeric scalars.

By default, simulate performs an unconditional simulation without a regression component in the model (each selected response variables are a numobs-by-numpaths matrix composed of NaN values indicating a complete lack of knowledge of the future state of all simulated responses). Therefore, variables in Tbl result from a conventional, unconditional Monte Carlo simulation.

For more details, see Algorithms.

Example: Consider simulating one path from a model composed of two response series, GDP and CPI, three periods into the future. Suppose that you have prior knowledge about some of the future values of the responses, and you want to simulate the unknown responses conditional on your knowledge. Specify InSample as a table containing the values that you know, and use NaN for values you do not know but want to simulate. For example, InSample=array2table([2 NaN; 0.1 NaN; NaN NaN],VariableNames=["GDP" "CPI"]) specifies that you have no knowledge of the future values of CPI, but you know that GDP is 2, 0.1, and unknown in periods 1, 2, and 3, respectively, in the simulation horizon.

Variables to select from InSample to treat as response variables yt, specified as a one of the following data types:

  • String vector or cell vector of character vectors containing numseries variable names in InSample.Properties.VariableNames

  • A length numseries vector of unique indices (integers) of variables to select from InSample.Properties.VariableNames

  • A length numvars logical vector, where ResponseVariables(j) = true selects variable j from InSample.Properties.VariableNames, and sum(ResponseVariables) is numseries

To perform conditional simulation, you must specify ResponseVariables to select the response variables in InSample for the conditioning data. ResponseVariables applies only when you specify InSample.

The selected variables must be numeric vectors (single path) or matrices (columns represent multiple independent paths) of the same width.

Example: ResponseVariables=["GDP" "CPI"]

Example: ResponseVariables=[true false true false] or ResponseVariable=[1 3] selects the first and third table variables as the response variables.

Data Types: double | logical | char | cell | string

Name-Value Arguments

Specify optional pairs of arguments as Name1=Value1,...,NameN=ValueN, where Name is the argument name and Value is the corresponding value. Name-value arguments must appear after other arguments, but the order of the pairs does not matter.

Before R2021a, use commas to separate each name and value, and enclose Name in quotes.

Example: simulate(Mdl,100,Presample=PSTbl,PresampleResponseVariables=["GDP" "CPI"]) returns a timetable of variables containing 100-period simulated response and innovations series from Mdl, initialized by the data in the GDP and CPI variables of the timetable of presample data in PSTbl..

Number of sample paths to generate, specified as a positive integer. The outputs Y and E have NumPaths pages, and each simulated response and innovation variable in the output Tbl is a numobs-by-NumPaths matrix.

Example: NumPaths=1000

Data Types: double

Presample responses that provide initial values for the model Mdl, specified as a numpreobs-by-numseries numeric matrix or a numpreobs-by-numseries-by-numprepaths numeric array. Use Y0 only when you supply optional data inputs as numeric arrays.

numpreobs is the number of presample observations. numprepaths is the number of presample response paths.

Each row is a presample observation, and measurements in each row, among all pages, occur simultaneously. The last row contains the latest presample observation. Y0 must have at least Mdl.P rows. If you supply more rows than necessary, simulate uses the latest Mdl.P observations only.

Each column corresponds to the response series name in Mdl.SeriesNames.

Pages correspond to separate, independent paths.

  • If Y0 is a matrix, simulate applies it to simulate each sample path (page). Therefore, all paths in the output argument Y derive from common initial conditions.

  • Otherwise, simulate applies Y0(:,:,j) to initialize simulating path j. Y0 must have at least numpaths pages, and simulate uses only the first numpaths pages.

By default, simulate sets any necessary presample observations.

  • For stationary VAR processes without regression components, simulate sets presample observations to the unconditional mean μ=Φ1(L)c.

  • For nonstationary processes or models that contain a regression component, simulate sets presample observations to zero.

Data Types: double

Variables to select from Presample to use for presample data, specified as one of the following data types:

  • String vector or cell vector of character vectors containing numseries variable names in Presample.Properties.VariableNames

  • A length numseries vector of unique indices (integers) of variables to select from Presample.Properties.VariableNames

  • A length numprevars logical vector, where PresampleResponseVariables(j) = true selects variable j from Presample.Properties.VariableNames, and sum(PresampleResponseVariables) is numseries

PresampleResponseVariables applies only when you specify Presample.

The selected variables must be numeric vectors and cannot contain missing values (NaN).

PresampleResponseNames does not need to contain the same names as in Mdl.SeriesNames; simulate uses the data in selected variable PresampleResponseVariables(j) as a presample for Mdl.SeriesNames(j).

If the number of variables in Presample matches Mdl.NumSeries, the default specifies all variables in Presample. If the number of variables in Presample exceeds Mdl.NumSeries, the default matches variables in Presample to names in Mdl.SeriesNames.

Example: PresampleResponseVariables=["GDP" "CPI"]

Example: PresampleResponseVariables=[true false true false] or PresampleResponseVariable=[1 3] selects the first and third table variables for presample data.

Data Types: double | logical | char | cell | string

Predictor data for the regression component in the model, specified as a numeric matrix containing numpreds columns. Use X only when you supply optional data inputs as numeric arrays.

numpreds is the number of predictor variables (size(Mdl.Beta,2)).

Each row corresponds to an observation, and measurements in each row occur simultaneously. The last row contains the latest observation. X must have at least numobs rows. If you supply more rows than necessary, simulate uses only the latest numobs observations. simulate does not use the regression component in the presample period.

Each column is an individual predictor variable. All predictor variables are present in the regression component of each response equation.

simulate applies X to each path (page); that is, X represents one path of observed predictors.

By default, simulate excludes the regression component, regardless of its presence in Mdl.

Data Types: double

Variables to select from InSample to treat as exogenous predictor variables xt, specified as one of the following data types:

  • String vector or cell vector of character vectors containing numpreds variable names in InSample.Properties.VariableNames

  • A length numpreds vector of unique indices (integers) of variables to select from InSample.Properties.VariableNames

  • A length numvars logical vector, where PredictorVariables(j) = true selects variable j from InSample.Properties.VariableNames, and sum(PredictorVariables) is numpreds

Regardless, selected predictor variable j corresponds to the coefficients Mdl.Beta(:,j).

PredictorVariables applies only when you specify InSample.

The selected variables must be numeric vectors and cannot contain missing values (NaN).

By default, simulate excludes the regression component, regardless of its presence in Mdl.

Example: PredictorVariables=["M1SL" "TB3MS" "UNRATE"]

Example: PredictorVariables=[true false true false] or PredictorVariable=[1 3] selects the first and third table variables as the response variables.

Data Types: double | logical | char | cell | string

Future multivariate response series for conditional simulation, specified as a numeric matrix or array containing numseries columns. Use YF only when you supply optional data inputs as numeric arrays.

Each row corresponds to observations in the simulation horizon, and the first row is the earliest observation. Specifically, row j in sample path k (YF(j,:,k)) contains the responses j periods into the future. YF must have at least numobs rows to cover the simulation horizon. If you supply more rows than necessary, simulate uses only the first numobs rows.

Each column corresponds to the response variable name in Mdl.SeriesNames.

Each page corresponds to a separate sample path. Specifically, path k (YF(:,:,k)) captures the state, or knowledge, of the response series as they evolve from the presample past (Y0) into the future.

  • If YF is a matrix, simulate applies YF to each of the numpaths output paths (see NumPaths).

  • Otherwise, YF must have at least numpaths pages. If you supply more pages than necessary, simulate uses only the first numpaths pages.

Elements of YF can be numeric scalars or missing values (indicated by NaN values). simulate treats numeric scalars as deterministic future responses that are known in advance, for example, set by policy. simulate simulates responses for corresponding NaN values conditional on the known values.

By default, YF is an array composed of NaN values indicating a complete lack of knowledge of the future state of all simulated responses. Therefore, simulate obtains the output responses Y from a conventional, unconditional Monte Carlo simulation.

For more details, see Algorithms.

Example: Consider simulating one path from a model composed of four response series three periods into the future. Suppose that you have prior knowledge about some of the future values of the responses, and you want to simulate the unknown responses conditional on your knowledge. Specify YF as a matrix containing the values that you know, and use NaN for values you do not know but want to simulate. For example, 'YF',[NaN 2 5 NaN; NaN NaN 0.1 NaN; NaN NaN NaN NaN] specifies that you have no knowledge of the future values of the first and fourth response series; you know the value for period 1 in the second response series, but no other value; and you know the values for periods 1 and 2 in the third response series, but not the value for period 3.

Data Types: double

Note

  • NaN values in Y0 and X indicate missing values. simulate removes missing values from the data by list-wise deletion. If Y0 is a 3-D array, then simulate performs these steps.

    1. Horizontally concatenate pages to form a numpreobs-by-numpaths*numseries matrix.

    2. Remove any row that contains at least one NaN from the concatenated data.

    In the case of missing observations, the results obtained from multiple paths of Y0 can differ from the results obtained from each path individually.

    For conditional simulation (see YF), if X contains any missing values in the latest numobs observations, then simulate throws an error.

  • simulate issues an error when selected response variables from Presample and selected predictor variables from InSample contain any missing values.

Output Arguments

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Simulated multivariate response series, returned as a numobs-by-numseries numeric matrix or a numobs-by-numseries-by-numpaths numeric array. simulate returns Y only when you supply optional data sets as numeric matrices or arrays, for example, you use the Y0 name-value argument.

Y represents the continuation of the presample responses in Y0.

Each row is a time point in the simulation horizon. Values in a row, among all pages, occur simultaneously. The last row contains the latest simulated values.

Each column corresponds to the response series name in Mdl.SeriesNames.

Pages correspond to separate, independently simulated paths.

If you specify future responses for conditional simulation using the YF name-value argument, the known values in YF appear in the same positions in Y. However, Y contains simulated values for the missing observations in YF.

Simulated multivariate model innovations series, returned as a numobs-by-numseries numeric matrix or a numobs-by-numseries-by-numpaths numeric array. simulate returns E only when you supply optional data sets as numeric matrices or arrays, for example, you use the Y0 name-value argument.

Elements of E and Y correspond.

If you specify future responses for conditional simulation (see the YF name-value argument), simulate infers the innovations from the known values in YF and places the inferred innovations in the corresponding positions in E. For the missing observations in YF, simulate draws from the Gaussian distribution conditional on any known values, and places the draws in the corresponding positions in E.

Simulated multivariate response, model innovations, and other variables, returned as a table or timetable, the same data type as Presample or InSample. simulate returns Tbl only when you supply the inputs Presample or InSample.

Tbl contains the following variables:

  • The simulated paths within the simulation horizon of the selected response series yt. Each simulated response variable in Tbl is a numobs-by-numpaths numeric matrix, where numobs is the value of NumObs and numpaths is the value of NumPaths. Each row corresponds to a time in the simulation horizon and each column corresponds to a separate path. simulate names the simulated response variable ResponseK ResponseK_Responses. For example, if Mdl.Series(K) is GDP, Tbl contains a variable for the corresponding simulated response with the name GDP_Responses. If you specify ResponseVariables, ResponseK is ResponseVariable(K). Otherwise, ResponseK is PresampleResponseVariable(K).

  • The simulated paths within the simulation horizon of the innovations εt corresponding to yt. Each simulated innovations variable in Tbl is a numobs-by-numpaths numeric matrix. Each row corresponds to a time in the simulation horizon and each column corresponds to a separate path. simulate names the simulated innovations variable of response ResponseK ResponseK_Innovations. For example, if Mdl.Series(K) is GDP, Tbl contains a variable for the corresponding innovations with the name GDP_Innovations.

If Tbl is a timetable, the following conditions hold:

  • The row order of Tbl, either ascending or descending, matches the row order of InSample, when you specify it. If you do not specify InSample and you specify Presample, the row order of Tbl is the same as the row order Presample.

  • If you specify InSample, row times Tbl.Time are InSample.Time(1:numobs). Otherwise, Tbl.Time(1) is the next time after Presample(end) relative the sampling frequency, and Tbl.Time(2:numobs) are the following times relative to the sampling frequency.

Algorithms

  • simulate performs conditional simulation using this process for all pages k = 1,...,numpaths and for each time t = 1,...,numobs.

    1. simulate infers (or inverse filters) the model innovations for all response variables (E(t,:,k) from the known future responses (YF(t,:,k)). In E, simulate mimics the pattern of NaN values that appears in YF.

    2. For the missing elements of E at time t, simulate performs these steps.

      1. Draw Z1, the random, standard Gaussian distribution disturbances conditional on the known elements of E.

      2. Scale Z1 by the lower triangular Cholesky factor of the conditional covariance matrix. That is, Z2 = L*Z1, where L = chol(C,"lower") and C is the covariance of the conditional Gaussian distribution.

      3. Impute Z2 in place of the corresponding missing values in E.

    3. For the missing values in YF, simulate filters the corresponding random innovations through the model Mdl.

  • simulate uses this process to determine the time origin t0 of models that include linear time trends.

    • If you do not specify Y0, then t0 = 0.

    • Otherwise, simulate sets t0 to size(Y0,1)Mdl.P. Therefore, the times in the trend component are t = t0 + 1, t0 + 2,..., t0 + numobs. This convention is consistent with the default behavior of model estimation in which estimate removes the first Mdl.P responses, reducing the effective sample size. Although simulate explicitly uses the first Mdl.P presample responses in Y0 to initialize the model, the total number of observations in Y0 (excluding any missing values) determines t0.

References

[1] Hamilton, James D. Time Series Analysis. Princeton, NJ: Princeton University Press, 1994.

[2] Johansen, S. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press, 1995.

[3] Juselius, K. The Cointegrated VAR Model. Oxford: Oxford University Press, 2006.

[4] Lütkepohl, H. New Introduction to Multiple Time Series Analysis. Berlin: Springer, 2005.

Version History

Introduced in R2017b