New Goodness-of-fit Diagnostics for Conditional Discrete Response Models
AbstractThis paper proposes new specification tests for conditional models with discrete responses. In particular, we can test the static and dynamic ordered choice model specifications, which is key to apply efficient maximum likelihood methods, to obtain consistent estimates of partial effects and to get appropriate predictions of the probability of future events. The traditional approach is based on probability integral transforms of a jittered discrete data which leads to continuous uniform iid series under the true conditional distribution. We investigate in this paper an alternative transformation based only on original discrete data. We show analytically and in simulations that our approach dominates the traditional approach in terms of power. We apply the new tests to models of the monetary policy conducted by the Federal Reserve.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1924.
Length: 33 pages
Date of creation: Nov 2013
Date of revision:
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Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-09 (All new papers)
- NEP-DCM-2013-11-09 (Discrete Choice Models)
- NEP-ECM-2013-11-09 (Econometrics)
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