Econometric Modelling of Time Series with Outlying Observations
AbstractEconomies are buffeted by natural shocks, wars, policy changes, and other unanticipated events. Observed data can be subject to substantial revisions. Consequently, a correct theory can manifest serious mis-specification if just fitted to data ignoring its time-series characteristics. Modelling U.S. expenditure on food, the simplest theory implementation fails to describe the evidence. Embedding that theory in a general framework with dynamics, outliers and structural breaks and using impulse-indicator saturation, the selected model performs well, despite commencing with more variables than observations (see Doornik, 2009b), producing useful robust forecasts. Although this illustration involves a simple theory, the implications are generic and apply to sophisticated theories.
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Bibliographic InfoArticle provided by De Gruyter in its journal Journal of Time Series Econometrics.
Volume (Year): 3 (2011)
Issue (Month): 1 (February)
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Web page: http://www.degruyter.com
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- David Hendry & Grayham E. Mizon, 2012. "Forecasting from Structural Econometric Models," Economics Series Working Papers 597, University of Oxford, Department of Economics.
- David Hendry & Jurgen A. Doornik & Felix Pretis, 2013. "Step-indicator Saturation," Economics Series Working Papers 658, University of Oxford, Department of Economics.
- David Hendry & Felix Pretis, 2011. "Anthropogenic Influences on Atmospheric CO2," Economics Series Working Papers 584, University of Oxford, Department of Economics.
- David Hendry & Grayham E. Mizon, 2013.
"Unpredictability in Economic Analysis, Econometric Modeling and Forecasting,"
Economics Series Working Papers
2013-W04, University of Oxford, Department of Economics.
- David F. Hendry & Grayham E. Mizon, 2013. "Unpredictability in Economic Analysis, Econometric Modeling and Forecasting," Economics Papers 2013-W04, Economics Group, Nuffield College, University of Oxford.
- David Hendry, 2011. "Unpredictability in Economic Analyis, Econometric Modelling and Forecasting," Economics Series Working Papers 551, University of Oxford, Department of Economics.
- Jennifer Castle & David Hendry, 2013. "Forecasting and Nowcasting Macroeconomic Variables: A Methodological Overview," Economics Series Working Papers 674, University of Oxford, Department of Economics.
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