Forecasting performance of seasonal cointegration models

Forecasts from two different seasonal cointegration specifications are compared in an empirical forecasting example and in a Monte Carlo study. The two seasonal cointegration specifications are the one proposed by Lee, with a parameter restriction included at the annual frequency, and the model proposed by Johansen and Schaumburg, with a general specification for the complex root frequency, respectively. In the empirical forecasting example we also include a standard cointegration model based on first differences and seasonal dummies and analyze the effects of restricting or not restricting seasonal dummies in the seasonal cointegration models. While the Monte Carlo results favor the specification suggested by Johansen and Schaumburg, and definitely so if larger sample sizes are considered, we do not find such clear cut evidence in the empirical example.