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Computer Automation of General-to-Specific Model Selection Procedures

Author

Listed:
  • David Hendry
  • Hans-Martin Krolzig

Abstract

Disputes about econometric methodology partly reflect a lack of evidence on alternative approaches. We reconsider econometric model selection from a computer-automation perspective, focusing on general-to-specific reductions, embodied in PcGets. Starting from a general congruent model, standard testing procedures eliminate statistically-insignificant variables, with diagnostic tests checking the validity of reductions, ensuring a congruent final selection. Since jointly selecting and diagnostic testing has eluded theoretical analysis, we study modelling strategies by simulation. The Monte Carlo experiments show that PcGets recovers the DGP specification from a general model with size and power close to commencing from the DGP itself.

Suggested Citation

  • David Hendry & Hans-Martin Krolzig, 2000. "Computer Automation of General-to-Specific Model Selection Procedures," Economics Series Working Papers 3, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:3
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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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