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Testing a Model of the UK by the Method of Indirect Inference

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  • Patrick Minford

    ()

  • Konstantinos Theodoridis
  • David Meenagh

Abstract

We use the method of indirect inference to test a full open economy model of the UK that has been in forecasting use for three decades. The test establishes, using a Wald statistic, whether the parameters of a time-series representation estimated on the actual data lie within some confidence interval of the model-implied distribution. Various forms of time-series representations that could deal with the UK's various changes of monetary regime are tried; two are retained as adequate. The model is rejected under one but marginally accepted under the other, suggesting that with some modifications it could achieve general acceptability and that the testing method is worth investigating further.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 20 (2009)
Issue (Month): 2 (April)
Pages: 265-291

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Handle: RePEc:kap:openec:v:20:y:2009:i:2:p:265-291

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: Bootstrap; Model evaluation; Non-linear time series models; Indirect inference; Open economy models; UK models; C12; C32;

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References

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Citations

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Cited by:
  1. Le, Vo Phuong Mai & Minford, Patrick & Wickens, Michael R., 2009. "The 'Puzzles' Methodology: en route to Indirect Inference?," CEPR Discussion Papers 7539, C.E.P.R. Discussion Papers.
  2. Fan, Jingwen & Minford, Patrick, 2009. "Can the Fiscal Theory of the price level explain UK inflation in the 1970s?," Cardiff Economics Working Papers E2009/26, Cardiff University, Cardiff Business School, Economics Section, revised Mar 2011.
  3. Minford, Patrick & Ou, Zhirong, 2009. "Taylor Rule or Optimal Timeless Policy? Reconsidering the Fed's behaviour since 1982," Cardiff Economics Working Papers E2009/19, Cardiff University, Cardiff Business School, Economics Section, revised May 2010.
  4. Patrick Minford & David Meenagh & Jiang Wang, 2006. " Testing a Simple Structural Model of Endogenous Growth," CDMA Conference Paper Series 0606, Centre for Dynamic Macroeconomic Analysis.
  5. Thomai Filippeli, 2011. "Theoretical Priors for BVAR Models & Quasi-Bayesian DSGE Model Estimation," 2011 Meeting Papers 396, Society for Economic Dynamics.

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