Levels, Differences and ECMs – Principles for Improved Econometric Forecasting*
Year: 2005
Type: article
Abstract: Unit‐root testing can be a preliminary step in model development, an intermediate step, or an end in itself. Some researchers have questioned the value of any unit‐root and cointegration testing, arguing that restrictions based on theory are at least as effective. Such confusion is unsatisfactory. Needed is a set of principles that limit and define the role of the tacit knowledge of the model builders. In a forecasting context, we enumerate the various possible model selection strategies and, based on simulation and empirical evidence, recommend using these tests to improve the specification of an initial general vector autoregression model.
Authors: P. Geoffrey Allen, Robert Fildes
Institutions: University of Massachusetts Amherst, Lancaster University
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122840906