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Semi-automatic Non-linear Model selection

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  • Jennifer Castle
  • David Hendry

Abstract

We consider model selection for non-linear dynamic equations with more candidate variables than observations, based on a general class of non-linear-in-the-variables functions, addressing possible location shifts by impulse-indicator saturation. After an automatic search delivers a simplified congruent terminal model, an encompassing test can be implemented against an investigator's preferred non-linear function. When that is non-linear in the parameters, such as a threshold model, the overall approach can only be semi-automatic. The method is applied to re-analyze an empirical model of real wages in the UK over 1860-2004, updated and extended to 2005-2011 for forecast evaluation.

Suggested Citation

  • Jennifer Castle & David Hendry, 2013. "Semi-automatic Non-linear Model selection," Economics Series Working Papers 654, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:654
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    References listed on IDEAS

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    More about this item

    Keywords

    Non-linear models; location shifts; model selection; autometrics; impulse-indicator saturation;
    All these keywords.

    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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