Computer automation of general-to-specific model selection procedures

Disputes about econometric methodology partly reflect a lack of evidence on alternative approaches. We reconsider econometric model selection from a computer-automation perspective, focusing on general-to-specific reductions, embodied in PcGets. Starting from a general congruent model, standard test...

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Bibliographic Details
Published in:Journal of economic dynamics & control 2001-06, Vol.25 (6), p.831-866
Main Authors: Krolzig, Hans-Martin, Hendry, David F.
Format: Article
Language:English
Subjects:
Automation
Computer based modeling
Computers
Consumption function
Data mining
Demand
Econometric methodology
Econometric models
Econometrics
Economic control
Economic dynamics
Encompassing
Information technology
Model selection
Monetary theory
Money demand
Monte Carlo experiments
Monte Carlo simulation
Studies
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Summary:Disputes about econometric methodology partly reflect a lack of evidence on alternative approaches. We reconsider econometric model selection from a computer-automation perspective, focusing on general-to-specific reductions, embodied in PcGets. Starting from a general congruent model, standard testing procedures eliminate statistically insignificant variables, with diagnostic tests checking the validity of reductions, ensuring a congruent final selection. Since jointly selecting and diagnostic testing has eluded theoretical analysis, we study modelling strategies by simulation. The Monte Carlo experiments show that PcGets recovers the DGP specification from a general model with size and power close to commencing from the DGP itself.
ISSN:0165-1889
1879-1743
DOI:10.1016/S0165-1889(00)00058-0