Publication Date
2005
Journal or Book Title
Oxford Bulletin of Economics and Statistics
Abstract
Unit-root testing can be a preliminary step in model development, an intermediate step, or an end in itself. Some researchers have questioned the value of any unit-root and cointegration testing, arguing that restrictions based on theory are at least as effective. Such confusion is unsatisfactory. Needed is a set of principles that limit and define the role of the tacit knowledge of the model builders. In a forecasting context, we enumerate the various possible model selection strategies and, based on simulation and empirical evidence, recommend using these tests to improve the specification of an initial general vector autoregression model.
DOI
10.1111/j.1468-0084.2005.00144.x
Pages
881-904
Volume
67
Recommended Citation
Allen, PG and Fildes, R, "Levels, differences and ECMs - Principles for improved econometric forecasting" (2005). Oxford Bulletin of Economics and Statistics. 7.
10.1111/j.1468-0084.2005.00144.x