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On determining the importance of a regressor with small and undersized samples

  • Peter Sandholt Jensen
  • Allan H. Würtz

    ()

    (Department of Economics, University of Aarhus, Denmark)

A problem encountered in, for instance, growth empirics is that the number of explanatory variables is large compared to the number of observations. This makes it infeasible to condition on all variables in order to determine the importance of a variable of interest. We prove identifying assumptions under which the problem is not ill-posed. Under these assumptions, we derive properties of the most commonly used methods: Extreme bounds analysis, Sala-i-Martin’s method, BACE, generalto- specific, minimum t-statistics, BIC and AIC. We propose a new method and show that it has good finite sample properties.

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File URL: ftp://ftp.econ.au.dk/afn/wp/06/wp06_08.pdf
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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2006-08.

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Length: 39
Date of creation: 14 Jul 2006
Date of revision:
Handle: RePEc:aah:aarhec:2006-08
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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  1. Fernandez, Carmen & Ley, Eduardo & Steel, Mark F. J., 2001. "Benchmark priors for Bayesian model averaging," Journal of Econometrics, Elsevier, vol. 100(2), pages 381-427, February.
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  12. Carrasco, Marine & Florens, Jean-Pierre & Renault, Eric, 2007. "Linear Inverse Problems in Structural Econometrics Estimation Based on Spectral Decomposition and Regularization," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 77 Elsevier.
  13. David F. Hendry & Hans-Martin Krolzig, 2004. "We Ran One Regression," Economics Papers 2004-W17, Economics Group, Nuffield College, University of Oxford.
  14. Durlauf, Steven N., 2001. "Manifesto for a growth econometrics," Journal of Econometrics, Elsevier, vol. 100(1), pages 65-69, January.
  15. Philip Cross & Charles F. Manski, 2000. "Regressions, Short and Long," Econometric Society World Congress 2000 Contributed Papers 0385, Econometric Society.
  16. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
  17. Breusch, Trevor S, 1986. "Hypothesis Testing in Unidentified Models," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 635-51, August.
  18. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
  19. Clive W. J. Granger & Harald F. Uhlig, 1988. "Reasonable extreme bounds analysis," Discussion Paper / Institute for Empirical Macroeconomics 2, Federal Reserve Bank of Minneapolis.
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