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Cross-data-vintage Encompassing

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  • Steve Cook

Abstract

The issues of model comparison and evaluation in the presence of data revision are examined. The initial analysis revisits the model validity and data accuracy tests of Hendry ["Oxford Review of Economic Policy" (1994) Vol. 10, pp. 86-106] to develop the concept of model and vintage coalescence (MVC). A taxonomy of MVC tests is proposed, with the finite-sample properties of the tests examined via Monte Carlo simulation. The analysis proceeds to extend the encompassing principle [see Mizon and Richard, "Econometrica" (1986), Vol. 54, pp. 657-678; "Contributions to Operations Research and Econometrics: The XXth Anniversary of CORE", Hendry and Richard (1989) MIT Press, Cambridge, MA] to permit the comparison of econometric models developed upon alternative vintages of data. The resulting cross-data-vintage encompassing tests are discussed, with their finite-sample properties compared with those of conventional encompassing tests. The paper concludes by considering implications of the present analysis for econometric modelling. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2008.

Suggested Citation

  • Steve Cook, 2008. "Cross-data-vintage Encompassing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(s1), pages 849-865, December.
  • Handle: RePEc:bla:obuest:v:70:y:2008:i:s1:p:849-865
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    1. Anthony Garratt & Shaun P Vahey, 2006. "UK Real-Time Macro Data Characteristics," Economic Journal, Royal Economic Society, vol. 116(509), pages 119-135, February.
    2. Gilbert, Christopher L, 1986. "Professor Hendry's Econometric Methodology," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 283-307, August.
    3. Dean Croushore & Tom Stark, 2003. "A Real-Time Data Set for Macroeconomists: Does the Data Vintage Matter?," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 605-617, August.
    4. Wren-Lewis, Simon, et al, 1996. "The Macroeconomic Effects of Fiscal Policy: Linking an Econometric Model with Theory," Economic Journal, Royal Economic Society, vol. 106(436), pages 543-559, May.
    5. Patterson, Kerry D & Heravi, Saeed M, 1991. "Data Revisions and the Expenditure Components of GDP," Economic Journal, Royal Economic Society, vol. 101(407), pages 887-901, July.
    6. Hendry, David F, 1994. "HUS Revisited," Oxford Review of Economic Policy, Oxford University Press, vol. 10(2), pages 86-106, Summer.
    7. Egginton, Don M. & Pick, Andreas & Vahey, Shaun P., 2002. "'Keep it real!': a real-time UK macro data set," Economics Letters, Elsevier, vol. 77(1), pages 15-20, September.
    8. Patterson, Kerry, 2002. "The Data Measurement Process for UK GNP: Stochastic Trends, Long Memory, and Unit Roots," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 21(4), pages 245-264, July.
    9. L. A. Boland, 1977. "Testability in Economic Science," South African Journal of Economics, Economic Society of South Africa, vol. 45(1), pages 51-59, March.
    10. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
    11. Mizon, Grayham E & Richard, Jean-Francois, 1986. "The Encompassing Principle and Its Application to Testing Non-nested Hypotheses," Econometrica, Econometric Society, vol. 54(3), pages 657-678, May.
    12. Gilbert, Christopher L, 1989. "LSE and the British Approach to Time Series Econometrics," Oxford Economic Papers, Oxford University Press, vol. 41(1), pages 108-128, January.
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    Cited by:

    1. Garratt, Anthony & Mitchell, James & Vahey, Shaun P. & Wakerly, Elizabeth C., 2011. "Real-time inflation forecast densities from ensemble Phillips curves," The North American Journal of Economics and Finance, Elsevier, vol. 22(1), pages 77-87, January.

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