One advantage of forecasts based on a VAR rather than separately forecasting the variables involved is
A)that VAR forecasts are easier to calculate.
B)you typically have knowledge of future values of at least one of the variables involved.
C)it can help to make the forecasts mutually consistent.
D)that VAR involves panel data.

Question

Quizplus · Accepted Answer

VAR models allow for interdependent relationships between variables to be incorporated into forecasts, ensuring that they are consistent with one another. This is not possible when variables are forecasted separately. The other options (A, B, and D) are not accurate statements about the advantages of VAR models.

One Advantage of Forecasts Based on a VAR Rather Than