Model Selection in Under-specified Equations Facing Breaks.
Although a general unrestricted model may under-specify the data generation process, especially when breaks occur, model selection can still improve over estimating a prior specification. Impulse-indicator saturation (IIS) can ‘correct’ non-constant intercepts induced by location shifts in omitted...
| Main Authors: | , |
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2010
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| _version_ | 1797106491097874432 |
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| author | Castle, J Hendry, D |
| author_facet | Castle, J Hendry, D |
| author_sort | Castle, J |
| collection | OXFORD |
| description | Although a general unrestricted model may under-specify the data generation process, especially when breaks occur, model selection can still improve over estimating a prior specification. Impulse-indicator saturation (IIS) can ‘correct’ non-constant intercepts induced by location shifts in omitted variables, which surprisingly leave slope parameters unaltered even when correlated with included variables. However, location shifts in included variables do induce changes in slopes where there are correlated omitted variables. IIS acts as a ‘robust method’ when models are mis-specified, and helps mitigate the adverse impacts of induced location shifts on non-constant intercepts and equation standard errors. |
| first_indexed | 2024-03-07T07:01:25Z |
| format | Working paper |
| id | oxford-uuid:7188ea7d-9277-4d7e-a6c3-5f83b9d10eb9 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T07:01:25Z |
| publishDate | 2010 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:7188ea7d-9277-4d7e-a6c3-5f83b9d10eb92022-03-29T17:17:16ZModel Selection in Under-specified Equations Facing Breaks.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:7188ea7d-9277-4d7e-a6c3-5f83b9d10eb9EnglishDepartment of Economics - ePrintsDepartment of Economics (University of Oxford)2010Castle, JHendry, DAlthough a general unrestricted model may under-specify the data generation process, especially when breaks occur, model selection can still improve over estimating a prior specification. Impulse-indicator saturation (IIS) can ‘correct’ non-constant intercepts induced by location shifts in omitted variables, which surprisingly leave slope parameters unaltered even when correlated with included variables. However, location shifts in included variables do induce changes in slopes where there are correlated omitted variables. IIS acts as a ‘robust method’ when models are mis-specified, and helps mitigate the adverse impacts of induced location shifts on non-constant intercepts and equation standard errors. |
| spellingShingle | Castle, J Hendry, D Model Selection in Under-specified Equations Facing Breaks. |
| title | Model Selection in Under-specified Equations Facing Breaks. |
| title_full | Model Selection in Under-specified Equations Facing Breaks. |
| title_fullStr | Model Selection in Under-specified Equations Facing Breaks. |
| title_full_unstemmed | Model Selection in Under-specified Equations Facing Breaks. |
| title_short | Model Selection in Under-specified Equations Facing Breaks. |
| title_sort | model selection in under specified equations facing breaks |
| work_keys_str_mv | AT castlej modelselectioninunderspecifiedequationsfacingbreaks AT hendryd modelselectioninunderspecifiedequationsfacingbreaks |