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Model Comparisons In Unstable Environments

Giacomini, R; Rossi, B; (2016) Model Comparisons In Unstable Environments. International Economic Review , 57 (2) pp. 369-391. 10.1111/iere.12161. Green open access

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Abstract

The goal of this article is to develop formal tests to evaluate the relative in-sample performance of two competing, misspecified, nonnested models in the presence of possible data instability. Compared to previous approaches to model selection, which are based on measures of global performance, we focus on the local relative performance of the models. We propose tests that are based on different measures of local performance and that correspond to different null and alternative hypotheses. The empirical application provides insights into the time variation in the performance of a representative Euro-area Dynamic Stochastic General Equilibrium model relative to that of VARs.

Type: Article
Title: Model Comparisons In Unstable Environments
Open access status: An open access version is available from UCL Discovery
DOI: 10.1111/iere.12161
Publisher version: http://dx.doi.org/10.1111/iere.12161
Language: English
Additional information: Copyright © (2016) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association. This is the peer reviewed version of the following article: [Giacomini, R. and Rossi, B. (2016), Model Comparisons In Unstable Environments. International Economic Review, 57: 369–392. doi: 10.1111/iere.12161], which has been published in final form at http://dx.doi.org/10.1111/iere.12161. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Keywords: Model Selection Tests, MisspeciÖcation, Structural Change, Kullback-Leibler Information Criterion
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1413777
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