On the constancy of time-series econometric equations
Parameter constancy is a fundamental requirement for empirical models to be useful for forecasting, analysing economic policy, or testing economic theories. However, there are surprises in defining a constant-parameter model, such that models with time-varying coefficients, and expansion of the para...
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| Format: | Journal article |
| Language: | English |
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Economic & Social Research Institute
1996
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| _version_ | 1797095551196463104 |
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| author | Hendry, D |
| author_facet | Hendry, D |
| author_sort | Hendry, D |
| collection | OXFORD |
| description | Parameter constancy is a fundamental requirement for empirical models to be useful for forecasting, analysing economic policy, or testing economic theories. However, there are surprises in defining a constant-parameter model, such that models with time-varying coefficients, and expansion of the parameterisation over time are both compatible with constancy, yet unbiased forecasts may not entail a sensible model choice. In-sample tests cannot determine likely post-sample predictive failure. A comparison of two models of UK money demand illustrates the analysis empirically, as one suffers considerable predictive failure yet the other does not, despite being identical in-sample. |
| first_indexed | 2024-03-07T04:29:28Z |
| format | Journal article |
| id | oxford-uuid:cdd32c72-7739-4409-a368-4e72b428526e |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T04:29:28Z |
| publishDate | 1996 |
| publisher | Economic & Social Research Institute |
| record_format | dspace |
| spelling | oxford-uuid:cdd32c72-7739-4409-a368-4e72b428526e2022-03-27T07:31:21ZOn the constancy of time-series econometric equationsJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:cdd32c72-7739-4409-a368-4e72b428526eEnglishDepartment of Economics - ePrintsEconomic & Social Research Institute1996Hendry, DParameter constancy is a fundamental requirement for empirical models to be useful for forecasting, analysing economic policy, or testing economic theories. However, there are surprises in defining a constant-parameter model, such that models with time-varying coefficients, and expansion of the parameterisation over time are both compatible with constancy, yet unbiased forecasts may not entail a sensible model choice. In-sample tests cannot determine likely post-sample predictive failure. A comparison of two models of UK money demand illustrates the analysis empirically, as one suffers considerable predictive failure yet the other does not, despite being identical in-sample. |
| spellingShingle | Hendry, D On the constancy of time-series econometric equations |
| title | On the constancy of time-series econometric equations |
| title_full | On the constancy of time-series econometric equations |
| title_fullStr | On the constancy of time-series econometric equations |
| title_full_unstemmed | On the constancy of time-series econometric equations |
| title_short | On the constancy of time-series econometric equations |
| title_sort | on the constancy of time series econometric equations |
| work_keys_str_mv | AT hendryd ontheconstancyoftimeserieseconometricequations |